Eternal vigilance is the price of freedom.
It’s also the price of freedom from old debts, as my former bankruptcy client learned.
He was about to close escrow on a new home a couple of years after his discharge.
But the sale came to a screaming halt when an old, discharged debt reappeared on his credit report.
It hadn’t been there before; it shouldn’t have reappeared. But “shouldn’t
” didn’t keep it from happening.
Meet zombie debt
As we fought to save the deal for his new home, we figured out that the debt that had reappeared long after the bankruptcy, was a junior loan on a property he’d owned before bankruptcy.
The servicer on the loan had changed, and the servicer was clueless
- That the property had been foreclosed years ago; and
- That the bankruptcy had eliminated my client’s liability for the debt
But being clueless didn’t keep the servicer from reporting that this mortgage debt was enforceable and delinquent. All of which threatened my client’s ability to get a new loan, or the price he’d pay for that loan.
The law probably gave my client a right to sue under the Fair Debt Collection Practices Act or for violation of the discharge injunction from the bankruptcy case.
As a practical matter, I called a lawyer for the new servicer, rattled my sword, and got the credit report corrected in a hurry.