Debtors sometimes are unable to open a checking account after receiving their bankruptcy Discharge. These debtors typically had a troubled history with their bank, generally involving fraud, bounced checks or excessive overdraft activity, resulting in this negative information being 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 a checking account, etc.
You will not be “deleted” from Chex Systems just because your debt to the bank was discharged in bankruptcy, as they are 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 is bound by 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 words to that effect. If this is not done, there is a dispute procedure set forth below that is very similar to the procedure employed to fix a credit report that is plagued with 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”, or words to that effect.
Step 3: If an inaccurate entry is noted, you should send to Chex Systems, preferably by certified mail:
· A copy of your 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 has 30 days to investigate your dispute. During this time the FCRA requires them 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, employing the above procedure should result in the previously reported negative information either being deleted or corrected so that it no longer acts as an impediment to your opening a checking account.
Prior to an actual bankruptcy filing our firm generally advises our clients, as a prophylactic measure, to attempt to open a checking account in a bank where they do not owe any money. Using this new account after a bankruptcy filing never presents a problem.