Capital One Collects Discharged Debts, Gets Caught, Pays Big

October 6, 2008

Imagine that you had filed for bankruptcy and thought all your debt was discharged. Now imagine that one day out of the blue, you receive a collection call about a debt you know was discharged.
In this instance, no imagination is needed. Capital One Bank may be trying to collect your discharged debt.

Capital One filed a proof of claim on approximately 5600 debts that had been discharged in prior bankruptcy cases. A proof of claim is a document that is filed with the bankruptcy court and used to validate the claim of a creditor.

According to L. Jed Berliner, Massachusetts Bankruptcy Lawyer, Capital One accepted about $340,000 on these discharged debts.

Capital One says that it has all ready returned most of the improperly obtained payments and that it is seeking to withdraw all of the proofs of claim that it has filed.

The U.S Department of Justice issued a press release stating that the U.S. Trustee Program announced on Oct 2, 2008 that it had filed with the United States Bankruptcy Court for the District of Massachusetts to enter into a settlement agreement with Capital One. Under the settlement, Capital One will be audited by an independent auditor, chosen by the courts and paid for by Capital One. The auditor will examine about 650,000 Capital One customer accounts.

The settlement says that if more than 100 erroneous claims are found in one year then the audit period will be extended. The settlement has to be approved by the U.S. Bankruptcy Court for the District of Massachusetts.

Under the settlement, any monies that Capital One received for the wrongly filed proofs of claim must be returned, as well as all monies reimbursed for any out of pocket expenses and attorney’s fees.

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