Unpaid Creditors Have right to Refuse You

Dear Bankruptcy Adviser,

I received my bankruptcy discharge almost a year ago. One of the debts that I was able to discharge was for a mobile phone service provider. Recently, I contacted that company to open a new account. Their operators immediately transferred me to the financial department, where I was told the debt was in collection. I explained that my debt had been discharged in bankruptcy. He then connected me with customer service. I was told that, unfortunately, the company would not accept me as a client due to my past debt.

I am confused. I thought that once my debt was discharged it would disappear and no record specific to this debt would exist. Can I do something about this? Are there any protections or laws to prevent this discriminatory behavior? I am worried because I want to start rebuilding my credit. If this shows up every time, I will never have a chance to have credit. -- Victoria

Dear Victoria,

You are the victim of wishful thinking. Let me tell a story that will illustrate the problem you are facing.

Let's say you loan a friend some money. Your friend makes a couple of payments, but after awhile he either refuses, or is unable, to continue making payments. A year later, your friend calls and asks you for another loan, even though he isn't paying on the first one. Will you give it to him? I seriously doubt it.

You had an account with this company and were unable to pay. You felt it appropriate to file bankruptcy and wipe out your personal liability to pay this debt, as is your right.

However, it is not discriminatory for the lender to say that you are not worthy of new credit, especially if asking for credit relatively soon after filing. The bankruptcy discharge wiped out your liability on the account. But the creditor isn't obligated to remove the account from its system. The creditor will likely always have a record of the delinquent account.

Eventually, you probably can re-establish your credit and re-apply for an account with this phone company. After a few years, other companies included in your bankruptcy may be willing to extend you credit. Some companies will require an initial deposit, but it might be worthwhile to re-establish an account. You will have to prove that you deserve their trust.

Negative accounts that were included in your bankruptcy will remain on your credit report. The accounts do not disappear; but they will eventually fall off your report. The majority of delinquent accounts can be removed seven years from the date of last payment or last use. You will need to monitor your credit report and confirm the accounts are no longer there.

You can re-establish credit. My clients have great credit only a few years after filing. You will just need to work at it diligently over the next few years to get back the positive credit you desire.