About five years ago, one could buy debt that had been discharged in bankruptcy for less than five cents on the dollar. Why do you think the price increased to seven cents on the dollar?

Bankruptcy, especially under Chapter 7, allows a judge to discharge certain debts. When these debts are discharged, they are no longer supposed to appear on the debtor’s online credit report. For Dan Rathavongsa, a factory worker in Raleigh, North Carolina, however, the discharged debt did not go away. A bankruptcy judge discharged a $9,523 debt that he owed to Capital One Financial. Nonetheless, Capital One continued to report Rathavongsa’s debt to the various credit bureaus as a “live” balance. When Rathavongsa tried to obtain a mortgage for a new house a year after the debt had been discharged, the would-be lender told him that he would have to either pay the Capital One debt or prove that the debt had been discharged. When Capital One refused to revise his credit report, Rathavongsa gave in and paid Capital One for a debt he no longer legally owed.