A District Court judge in Illinois has denied a defendant’s moition to dismiss claims it violated the Fair Credit Reporting Act after noting that a pair of debts were discharged in bankruptcy even though they were incurred after the bankruptcy had been discharged.
The background: The plaintiff filed for bankruptcy under Chapter 13 in 2020, later opening two new credit accounts while the case was still active. When the bankruptcy was converted to Chapter 7, the plaintiff amended her debt schedule to include those accounts but did not list the dates the debts were incurred or the account numbers. The bankruptcy court issued a summary discharge order in 2022 that extinguished all dischargeable debts.
- After the discharge, the defendant, a credit reporting agency, updated the plaintiff’s consumer report to reflect the bankruptcy but continued to report the two new accounts with charge-off statuses and thousands of dollars in outstanding balances.
- The plaintiff disputed the entries, asserting that all pre-conversion debts were discharged and should therefore have appeared with zero balances.
- When the defendant continued reporting the debts as delinquent, the plaintiff filed suit alleging violations of the FCRA for failing to assure maximum possible accuracy and for failing to conduct a reasonable reinvestigation.
The ruling: The defendant sought dismissal of the portion of the FCRA claim related to its pre-dispute reporting, arguing that it reasonably relied on information from furnishers and had no notice that the debts were inaccurate until it received the plaintiff’s dispute letter. Judge Andrea R. Wood of the District Court for the Northern District of Illinois rejected that argument, finding the complaint plausibly alleged that the defendant knew or should have known the debts were discharged when it received the bankruptcy order.
- The ruling emphasized that the discharge order itself stated that debts owed before the conversion were discharged, and that other credit bureaus reportedly updated the accounts to zero balances.
- Judge Wood noted that whether the defendant actually knew the debts were inaccurate is a factual question inappropriate for resolution at the pleadings stage. As she put it, determining reasonableness is “best left for a later day,” adding that the complaint provides a sufficient basis to infer potential defects in the defendant’s procedures. “Whether a party actually knows something is a question of fact that should not be decided until the parties have had an opportunity to put on evidence,” Judge Wood wrote.
