Banking After Bankruptcy

Most debtors are concerned about being able to open bank accounts after completing their bankruptcy and receiving their discharge. While most debtors will not have any difficulty opening new bank accounts, some debtors are unable to open a checking account after receiving their bankruptcy discharge. Typically, this is true for the debtors who have had a problematic history with their bank, involving bounced checks or excessive overdraft activity. As a result this negative information was reported to a check reporting company known as Chex Systems. Such negative information remains in this database service for five (5) years and is readily accessed and utilized by its members (usually financial institutions) in making decisions about who will be allowed to open new checking account.

While the debtors will not be removed from Chex Systems just because their debt to the bank was discharged in bankruptcy, as it is not required to remove a previously submitted, accurate report. However, Chex Systems is credit reporting agencies just like Equifax, Experian and Trans Union, and as such are required to follow the Fair Credit Reporting Act (“FCRA”) and other laws. The banks reporting to Chex Systems are required to regularly update their consumer reports with accurate information. Accordingly, when the debt that formed the basis of their negative report is discharged in bankruptcy, the member bank must report the account as “$0.00 balance due, discharged in bankruptcy”, or something similar. If this is not done, there is a dispute procedure that is very similar to the procedure employed to fix a credit report that is includes inaccurate, post-bankruptcy entries:

Step 1: Order a copy of your consumer report from Chex Systems, whose mailing address for disputes is: 7805 Hudson Road, Suite 100, Woodbury, MN 55125.

Step 2: Review the Chex Systems consumer report for accuracy, making sure that each discharged debt is reported as “$0.00 balance due, discharged in bankruptcy”.

Step 3: If an inaccurate entry is noted, you should send to Chex Systems, preferably by certified mail:

A copy of the Chex Systems report, with the inaccurate information highlighted or flagged in some fashion;

A copy of your bankruptcy discharge;

A copy of Schedules “D”, “E” and “F” from your bankruptcy petition;

A letter explaining that the disputed item is no longer accurate, and that it should be reported as “$0.00 balance due, discharged in bankruptcy”.

Step 4: Chex Systems will have 30 days to investigate the dispute. During this time the FCRA requires it to contact the member bank to verify that the account now has a $0.00 balance due because of the bankruptcy Discharge.

Assuming that Chex Systems and the member bank follow the law, the above steps should result in the previously reported negative information either being deleted or corrected so that it no longer acts as an impediment to the debtor opening a checking account.

In order to prevent this type of a problem, prior to an actual bankruptcy filing I advise my clients to open a checking account in a bank where they do not owe any money. Debtors will be able to use this new account after their bankruptcy filing without any difficulty.

If you contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a Rochester, NY, bankruptcy lawyer.

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