Bankruptcy Discharge Does Not Prohibit A Lawsuit For Inaccurate Credit Report Information

October 14, 2012

Court Rules That Bankruptcy Discharge Does Not Prevent Consumer's Ability To File a Lawsuit For Inaccurate Reporting on Credit Report

Magistrate Judge Joseph Spero found that a lawsuit filed by Karen King against Bank of America for violations of the Fair Credit Reporting Act ("FCRA"), California Consumer Credit Reporting Agencies Act ("CCRAA") and California Unfair Competition Law ("UCL") fell within the jurisdiction of the District Court. Karen King v. Bank of America, N.A., 2012 U.S. Dist. LEXIS 141963.

Karen King Received A Bankruptcy Discharge

On July 21, 2010, Karen King received a bankruptcy discharge pursuant to 11 U.S.C. ยง727. Included in her discharge was a $50,877.00 debt owed to Bank of America, N.A. On July 23, 2010, the Bankruptcy Court sent Bank of America notice of her discharge.

Despite The Discharge, Bank of America Continued to Report the Debt as Delinquent on Karen King's Credit Report

On or about May 5, 2011 Ms. King sent Experian written notice that Bank of America was inaccurately reporting that she was delinquent on payments for a debt that was discharged in bankruptcy. Simply put, Ms. King could not be delinquent on payments for a debt she no longer owed. On June 6, 2011 Ms. King received a copy of her Experian credit report. The credit report reflected that Bank of America was still reporting the debt incorrectly.

On July 6, 2012 Karen King Sued Bank Of America

On July 6, 2012, Ms. King filed a lawsuit against Bank of America in Superior Court. Her lawsuit claimed that Bank of America failed to investigate her dispute of the debt, failed to remove the inaccurate derogatory information and conducted unfair and unlawful business practices. Ms. King claimed that Bank of America's actions were intentional and in reckless disregard of it's duty. On August 8, 2012, Bank of America had the case reassigned to the District Court and then moved to dismiss Ms. King's lawsuit.

Bank of America Stated Several Reasons for Dismissing the Lawsuit; the District Court Disagreed With All of Their Reasons

Bank of America claimed that Ms. King failed to state a claim or allege any loss of money or property. They also argued that Ms. King could not bring a lawsuit until she suffered actual harm by Bank of America's actions. Bank of America further argued that pursuant to Walls v. Wells Fargo Bank, N.A. 276 F.3d 502 (9th Cir. 2002) the District Court lacked jurisdiction and that the proper forum for Ms. King to raise any alleged violations was the Bankruptcy Court. Judge Spero disagreed with all of their arguments. In part, Judge Spero cited Hanks v. Talbots Classics Nat'l Bank, 2012 U.S. Dist. LEXIS 109934, 2012 WL 3236323 "while FCRA and the discharge stay are similar, they are not identical. They differ in their objectives. The FCRA seeks to minimize credit reporting errors and to cure those that are made in a prompt and efficient manner. The discharge stay is directed to enforcing the bankruptcy discharge". Judge Spero ruled that the two laws can coexist. Therefore, Bank of America's motion to dismiss Karen King's lawsuit was denied.