Prisoners of debt

In a
financial version of Night of the Living Dead, debts forgiven by bankruptcy
courts are springing back to life to stalk consumers. Fuelling these miniature
horror narratives is an improbable marketplace in which seemingly extinguished debts are
avidly bought and sold. The
case of Avant Garde Rathavongsa exemplifies how off debts recover vitality. The
Raleigh (NC) mill worker pulled himself out from beneath a mountain of bills
by agency of a bankruptcy legal proceeding that wrapped up in 2002. One of the debts
the justice cancelled, or “discharged,” was $9,523 Rathavongsa owed to
Capital One Financial, the large credit-card company. But Capital One continued to
report the mill worker’s discharged debt to recognition bureaus as a live
balance, according to written documents filed in United States Bankruptcy Court in Raleigh. \This sort of failure by
creditors to update recognition studies haps with some frequency, consumer lawyers
and court-employed bankruptcy legal guardians say. And it can have got got consequences: In
September, 2003, when Rathavongsa tried to fold on a $274,650 mortgage for a
new house, his would-be lender, Wachovia, said he would either have to pay
Capital One or show cogent evidence from the credit-card company that the debt had been
discharged. Despite respective phone calls and a missive from his attorney, he says,
Capital One never revised the recognition report. To obtain the place loan,
Rathavongsa eventually did what many consumers in this state of affairs do. He gave in
and paid Capital One $9,523 he no longer legally
owed. HAPPENS
ALL THE TIME, YOUR
HONOR Because of episodes like
this, discharged debts have got attracted the attending of little-known steadfasts expert
at purchasing and merchandising a scope of delinquent consumer obligations. Back-due bills
with a human face value of millions of dollars alteration custody at a steep price reduction every
year. Five of the companies in this concern are publicly traded on Nasdaq. Others have got big private-money backers. B-Line, in Seattle, was acquired last
year by the Dallas-based hedge monetary fund house Lone Star Funds. The investing bank
Bear Stearns have two bankruptcy-debt buyers: Max Recovery and eCast
Settlement. The very existence
of this marketplace confounds even some veteran soldiers in the bankruptcy field. During
a preliminary hearing in New House Of York in March, United States Bankruptcy Judge Henry Martin Robert Drain
asked a lawyer for JPMorgan Pursuit how the depository financial institution had managed to sell consumer
credit-card debts that had been discharged. “I don’t cognize who would
buy a discharged account,” the perplexed judge
said. “Happens all the
time, your honor,” the Pursuit lawyer, Seth Thomas Vitamin E Stagg,
responded.