Some of the country's largest financial firms have been accused of harassing consumers over debts that courts have canceled. Troy Norton, 84, a retired prison guard who lives in Bismarck, Ark., claims in a lawsuit filed in June in U.S. Bankruptcy Court in Hot Springs that he was a victim of improper collection attempts by Bank of America Corp. (BA) and two collection agencies. He obtained a discharge of certain debts in June, 2006, after medical bills prompted him to seek Chapter 7 protection. Court documents show that he received eight collection letters from the bank on credit-card debt of $4,218 that a judge had canceled.
In a July motion to have the case dismissed, Bank of America denied acting unlawfully. A spokeswoman declined to discuss the suit, which is pending.
Some debtors end up in bankruptcy a second time, and some creditors use this as an opportunity to seek payment on discharged debt. Rita Childers, 76, thought she had left behind an $855 bill owed to GE Money Bank, a unit of General Electric's (GE) finance division, when the account was discharged in a Chapter 7 bankruptcy she filed in 2005. The former real estate agent in Klamath Falls, Ore., had quit her $30,000-a-year job to care for her husband, who suffers from Alzheimer's. Social Security and his veteran's pension didn't cover their bills.
After the Chapter 7 case, Childers fell behind again and filed under Chapter 13, which allows debtors to repay creditors over time. GE Money had transferred the account to a debt collector that filed new claims in the Chapter 13 to recoup the canceled $855 debt. In April, Childers sued GE Money, which then withdrew the claim, citing a paperwork mistake. In an e-mail, GE Money said it tries "to avoid these errors and fixes them if they occur."
By Robert Berner