Jay Fleischman discusses whether the failure to correct a credit report after a bankruptcy discharge is really a violation of the discharge injunction. I have experienced two very real examples of how the continued reporting of discharged debt shadows a debtor’s fresh start.

The first is in the insidious use of credit scores for pricing of insurance. I find no linkage between credit worthiness and insurance claims. It appears to me to be a situation where Fair Isaacs, or other providers of credit scores, has sold insurers on the idea. Why should the insurers resist? It gives them a reason to increase premiums.

More distasteful in my mind is the situation where a homeowner has a refinance or home purchase in process. When the lender finds a credit report still studded with apparently unpaid debt, the would be borrower must chose between paying the discharged debt or losing the loan. Nice work for the creditor: do nothing, even when the law requires you to report correctly, and garner money to which you have no right.

My colleague at the Bankruptcy Law Network Pam Stewart addressed the question “should I pay off my Chapter 13 plan early?”.

Her conclusion addressed the policy in some jurisdictions that a payoff earlier than the plan proposed may trigger a requirement to pay 100% of the debt. That isn’t the rule where I practice, at least under pre “reform” law, thanks in part to an appellate decision I won allowing early payoff without an increase in the pay in.

I think there remains a reason not to pay off a plan early: the plan payments, at least to the extent they are going to general unsecured creditors, represent an interest free loan. Why rush to pay off a debt where there is no cost to paying later?

One danger in proposing to pay off a plan early is the possibility that the trustee might seek an increase in the monthly payment if the debtor now has more available money each month.

I see the continuance of the Chapter 13 plan in circumstances where the debtor’s situation has improved as a chance to build up cash reserves. None of my clients have sufficient money set aside for the unexpected. It’s a chance to put some extra money into delayed maintenance, whether it’s on your possessions or your own health. Practice saving money while the Chapter 13 still exercises some control over your spending.

My advice might differ where the clients are younger or might have a real chance to rebuild to buy a house, etc. where getting the discharge behind them has a tangible, rather than a psychological, advantage. But absent that need, sit back, make the payments, and pocket any improvement in your situation for a rainy day.

The return receipt on my “do not contact” letter to ATT arrived at my office showing receipt on July 6th. Between July 7 and July 10, we got seven calls at home about the disputed account; on July 12th, we got a call from NCO who announce that the account has been turned over to them for collection.

As of yet, I have no contact information for NCO. When I get it, I will repeat my “do not contact” letter and invite them to call my lawyers, Moran Law Group, to discuss resolution of the dispute.

Check back for updates. The beginning of the tale.

Read the conclusion.

Today’s experience with credit card issuers topped the tale I was told last week by a new client of hopeless insolvency and an enhanced credit offer from a card holder to whom she already owed half of her annual salary: today’s offer of a new credit card was delivered to my client at the address of her bankruptcy lawyer, me!

This client has not, on my instructions, paid her existing credit card debt of over $200,000 for at least nine months. The link between her name and my address can only have come from contacts between collectors on the existing debt and my staff, who have been telling collectors that we do intend to file a bankruptcy case for the woman. Ironically, we did file her bankruptcy at the end of June.

Add to this the fact the woman has no income of her own, and her spouse owes even more than she does. And Bank of America offered her a “pre approved” credit card delivered to my office.

It is hard to believe, as the creditors lobby claimed, that all the blame for consumer bankruptcies lies on the heads of borrowers when lenders hand out credit like advertising flyers.

I’m being hounded by bill collectors; or, more precisely, ATT’s long distance arm. You see, I called up and canceled my long distance service at home after seeing that my marvelous “plan” cost me $13 a month whether or not I made any long distance calls. The guy in the call center overseas tried to talk me out of canceling, but I insisted.

Only it seems he didn’t cancel the service as directed and I continued to get bills, which I refuse to pay. The bill for something I didn’t want is now up to $43. Over the past couple of weeks, we’ve gotten 6-10 calls a day from ATT.

Usually, our phone is dialed by a computer program and there is dead air when you pick up the phone. If you wait on the phone long enough, either a recorded voice tells you “this is an important message from ATT” or you get the guy with the script in the call center in India who cannot/will not address the dispute. He only wants to know when I will pay. “Never” doesn’t seem to be in his vocabulary.
I often advise clients who must wait to file a bankruptcy case to utilize their rights under California’s Rosenthal Act to tell creditors not to contact them. California’s law imports a bundle of consumer rights from the federal Fair Debt Collection Practices Act and applies them to the original creditor as well as third party collectors. The federal act only applies to debt collectors and not to the original creditor.

Though I’ve been handing out a sample letter to invoke the right to be free of harassing calls for several years now, but have no real feed back on whether creditors and collectors actually honor the right to peace at home.

So, I’ve become an experiment in my own practice: I sent ATT a do-not-contact letter on July 2, return receipt requested. By sending it RRR, I will have proof of when ATT gets my letter. We are keeping a log at home of each of these ATT collection calls, so I can cross check receipt of the letter with the calls we get.

Stay tuned for the next episode of consumer vs. The Phone Company (for those of you who’ve seen the old movie The President’s Analyst.) See Part Two: Taking my own advice