Bank of America's unwritten policy to charge off nondelinquent credit card account if consumer files bankruptcy

  • Hi Guest, welcome to the help forum. You can get fast answers to your customer service questions here. We have a dedicated team of advocates who are ready to help. Just go to the section that matches your question and ask us!
  • If you've posted a question or issue for our advocates to assist with, please be sure to check back frequently for responses and requests for clarification.
  • Did you know you can get email notifications when something new posts to your favorite forum? It's easy. Just click the "watch" link right next to the "post new thread" button at the top of your favorite forum. The rest is easy. Now you'll never miss another conversation.
  • Want to become an expert user? Drop by the How to use this forum section and all will be revealed. We'll show you how to make the most of your experience.
Feb 19, 2021
3
0
1
44
I am a Retired Disabled Navy Veteran. I filed Chapter 13 on 10/1/2016 to save my home from a racist HOA. I listed BOA as a creditor. However, I continued to fulfill my obligation to BOA. I paid timely and well above the minimum payment. However, BOA charged off the account on 12/4/2016. I was never late before filing Ch. 13; I did not go through with the bankruptcy and the Ch. 13 was dismissed in March 2017.

I continued to make timely and above the minimum payments throughout 2017. And up until 11/2018. First, BOA claimed that the account was 180 days late to justify the Charge off. Next, it said that it automatically charges off accounts when bankruptcy is filed. I emailed a letter dispute to corporate Chief Client Care Executive (Holly O'Neill and CEO Brian Moynihan) on 2/15/21. I received a call from BOA on 2/18/2021. She said that her name was Sandra Allen and that she was following up on some communications that I sent in to Bank of America. She pretended to verify the account for security purposes. And then said, "This is an attempt to collect a debt." I interrupted saying that I had disputed that and sent a complaint to corporate. And I asked that she not call me anymore. She said, "But that's the reason...I'm calling from corporate." I asked, "You calling me from corporate for what." "You asked us to give you a call." " You had written a letter." I said, "Yes I did because you charged off that account prematurely and there was nothing to substantiate BOA charging off that account at that time; it was not past due." She then proceeded to read another disclosure, saying, "Because of the age of the debt we will not sue you for it and we will also not consider any payments you make under this law." I abruptly interrupted, saying, “Hold up, Are you collections?" Ms. Allen paused, and said "Yes." However, Ms. Allen later claimed that she was an officer in the Executive Office/ BOA's Customer Advocate. So, Ms. Allen feigned to call about my complaint to corporate, but surreptitiously intended to collect a debt BOA claimed that was owed to them. Bank of America LIED which proves that it will go to whatever extent necessary to support its heinous actions and meet its financial objectives. So, my complaint meant absolutely nothing to Bank of America. I strenuously assert that Bank of America has no respect for me or others that share the same racial identity. I inquired about my account. Ms. Allen said the account was charged off on 11/30/2016. I have heard from other BOA employees that the charge off happened on 10/1/2016, 12/04/2016, and 11/30/2016. However, BOA continues to report that the charge off occurred on 12/4/16. Also, BOA continually reports to Credit Reporting Agencies that the $3,735 written off and the account charged off on 12/4/2016, contradicting the Collections/Customer Advocate Sandra Allen's account that the account charged off on 11/30/2016. The Customer Advocate claimed that it is their "Policy' to charge off accounts whenever the accountholder files bankruptcy regardless of the status of the account, i.e., whether delinquent or not. However, when I asked for this purported policy in writing, she could not provide, saying that she did not have that policy in writing. Notably, BOA did not refer the matter to collections until September 2017. However, I did not receive any calls or letters from collections. I believe that there was no collection activity on the account since I was current on the account and continued to make timely payments. I am concerned about this "unwritten policy" that BOA asserts when it is advantageous for BOA to do so. Bank of America could have reduced its risk by closing the account to prevent the cardholder's access to credit. But to charge off the account without the account being past due was extreme and had severe consequences to the consumer. The Bankruptcy alone penalized the consumer. And BOA's action to charge off the account without the account being past due further penalized the consumer. Moreover, this alleged unwritten policy has discriminatory connotations against So-called Black Consumers/Customers. I thank you for any assistance that your agency can provide in this matter.
 

Neil Maley

Moderator
Staff Member
Advocate
Dec 27, 2014
25,139
26,916
113
New York
www.promalvacations.com
First- thank you for your service- as a fellow Navy Veteran.

A bank can close all your credit cards when you file for bankruptcy- and it has nothing to do with racial discrimination and everything to do with the bankruptcy filing.

This article might help you understand- while it is from an attorney in Texas, it is usually the same in most states.


Have you spoken to an attorney about what occurs when you file for bankruptcy protection? An attorney can advise you on this.
 
Feb 19, 2021
3
0
1
44
First- thank you for your service- as a fellow Navy Veteran.

A bank can close all your credit cards when you file for bankruptcy- and it has nothing to do with racial discrimination and everything to do with the bankruptcy filing.

This article might help you understand- while it is from an attorney in Texas, it is usually the same in most states.


Have you spoken to an attorney about what occurs when you file for bankruptcy protection? An attorney can advise you on this.
Thank you for your response. I have spoken with an attorney. At the time of filing bankruptcy, I was fully aware that I could not keep credit cards. As a matter of fact, in a mad rush to I pay them off, I paid well above the minimum payments. I expected them to be closed, and that I would not have further access to credit. My primary reason for filing bankruptcy was to protect my home from a racist HOA. I have always responsibly paid my obligations on time. My attorney set up a payment plan listing all my creditors. Notably, BOA never made a claim for payment to the court. However, I continued to make timely and well above the minimum payments. I filed on 10/1/2016. And made a payment on 10/4, and continued to timely pay on the account. However, Bank of America charged the account off on 12/04/2016, sent it to collections, and claimed that the account was 180 days late. Bank of America initially claimed that account was charged off due to 180 days late payment, not filing Bankruptcy. I was never late on this account. I spoke with collections, and supported with online payments that this account was never late. Collections noted that the account was never late, and referred me back to BOA. I expected the account to be closed, but did not expect this account to be charged off as though it was seriously delinquent. I have looked at federal regulations, and I have not found any regulation(s) that supports the automatic charge off of accounts if bankruptcy is filed. However, there is ample regulation supporting charge off for seriously delinquent accounts. Moreover, I asked BOA for documentation to support this alleged policy and BOA admitted that there was no written policy. As to the issue of race, I strenuously don’t believe that BOA without sufficient justification would charge off accounts of so-called White Cardholders if they were not seriously delinquent. Charge off and Closing the account to prevent further access to credit are two different actions. Thank you
 

smd

Mar 14, 2018
836
1,723
93
I said, "Yes I did because you charged off that account prematurely and there was nothing to substantiate BOA charging off that account at that time; it was not past due."

Federal regulations require banks to charge off loans within 60 days of a bankruptcy filing unless they can document that repayment is likely. Even though your payments were current, if your Ch13 filing showed that your debts exceeded the value of your assets, BofA was required to charge off the debt.

So, Ms. Allen feigned to call about my complaint to corporate, but surreptitiously intended to collect a debt BOA claimed that was owed to them.

A charge off doesn't change your obligation to pay a debt--It's an internal accounting measure at a bank. Did you still have a balance on your credit card when you stopped making payments on 11/2018? If so, BOA is correct that you owe them a debt.
 
Feb 19, 2021
3
0
1
44
Federal regulations require banks to charge off loans within 60 days of a bankruptcy filing unless they can document that repayment is likely. Even though your payments were current, if your Ch13 filing showed that your debts exceeded the value of your assets, BofA was required to charge off the debt.

My debts did not exceed the value of my assets. BOA initially claimed the charge off was due 180 days late payments. And when that contention could not be supported then claimed that it was due to the bankruptcy. What is the particular regulation you referenced? Strangely, you asserted a regulation to support the possible reason for charge off, but BOA cannot posit federal regulation to support that bankruptcy automatically charges off account. If BOA was justified in its actions, there should be regulation and no hesitation to support its actions. Also, Bank of America charged off the account on 12/4/16. However, BOA did not report to CRA’s until 12/2018. Notably, BOA never referred to collections since I continued to pay timely. Are you familiar with DOFD, date of first delinquency? I never said that a charge off negates the obligation to pay. In think you are missing the point. I said that the account should have been closed, not charged off due to the fact the account was not delinquent. Charge off and Closed are two separate actions. I had other credit cards at the time and they were closed, not charged off.

A charge off doesn't change your obligation to pay a debt--It's an internal accounting measure at a bank. Did you still have a balance on your credit card when you stopped making payments on 11/2018? If so, BOA is correct that you owe them a debt.
 

Skippy

May 30, 2019
751
1,865
93
There are several possibilities here. You need to consult with your attorney to see which, if any or a combination thereof, might be valid:
  1. Because you continued to make payments to your BOA credit card within 90 days of filing bankruptcy and after your filing date, you may have "reaffirmed the debt". This means that in the eyes of the bankruptcy court, you agreed to continue paying the debt rather than wiping it clean. (Again, you should consult with your attorney, not a public message board; however, it appears to me that making payments to BOA was a mistake.) And BOA therefore has an opportunity to try to collect it even though it was written off.

  2. BOA did not receive record of your bankruptcy 10/1/16 filing right away, and took some time to process it. As noted above in Post #2, a bank is required by law to write off the debt within 60 days, and 12/4/16 would be just about 60 days after the 3 days after a filing that a bank would be typically notified by companies that specialize in searching BK court records. And, while Charge-off and closing the account are two different actions, once a debt is being charged-off, the creditor must also by law close the account.

  3. Your communications with BOA suggested that you might take action other than in a typical Chapter 13 filing. This caused some confusion on their end, so they did not charge off your account right away.

  4. Even if you made some payments, prior to your Chapter 13 filing, BOA was made aware of your other debts. (You mentioned something about substantial amount of money owed to an HOA. That could have been reported to a collections agency, and therefore appeared on your credit report). So it moved to a collections mode prior to your filing and still tried to collect until other information was made available.

  5. Your debt was transferred from BOA to a collections agency. While banks tend to follow regulations tightly, many collections agencies are, well, loose in what they may say over the phone. A collections agent will say just about anything to get you to pay including, sadly, pretending to be someone else. Some of your later interactions may have been with such an agency.
Thinking in the context of self-advocacy, please consider: What is your desired outcome here? Are you trying to let go of your BOA debt, get your card reopened, or something else? If part of that 'something else' is to get BOA in trouble for what you believe was incorrect actions on their part -- albeit not following technical regulations or outright racial profiling -- Post #6 is a great suggestion. Also consider filing a carefully worded complaint with the Consumer Financial Protection Bureau.


In the meantime, if you have not already, I suggest you get a copy of your credit report to see what is being reported by BOA to the credit bureaus 4 1/2 years after the fact. You can get that for free through https://www.annualcreditreport.com/index.action.
 
Last edited:

smd

Mar 14, 2018
836
1,723
93
What is the particular regulation you referenced? Strangely, you asserted a regulation to support the possible reason for charge off, but BOA cannot posit federal regulation to support that bankruptcy automatically charges off account. If BOA was justified in its actions, there should be regulation and no hesitation to support its actions. Also, Bank of America charged off the account on 12/4/16. However, BOA did not report to CRA’s until 12/2018.

I linked to it in my post above. It's 69 FR 36904 (Uniform Retail Credit Classification and Account Management Policy):

Loans in bankruptcy should be classified Loss and charged off within 60 days of receipt of notification of
filing from the bankruptcy court or within the time frames specified in this classification policy, whichever is
shorter, unless the institution can clearly demonstrate and document that repayment is likely to occur.
The 12/4/2016 chargeoff is roughly 60 days after your 10/1/2016 Ch13 filing. I assume they didn't report it to the CRA's until 12/2018 since you continued to make payments until 11/2018.
 
Jun 24, 2019
889
1,796
93
73
Our OP should write in and tell us what he would like and how he thinks we can help.

Our OP filed for bankruptcy. He may have had the assistance of an attorney for that. Even though he dismissed the case, the bankruptcy filing will have consequences, and his attorney should have advised him of that.

Our OP wrote to top management at B of A and got an immediate response. There things go sideways because, according to OP, he wants to argue about who is calling and from where, rather than stating his goal and asking for assistance.

Our OP says he has consulted another attorney.

Whether B of A has a policy that results in a write-off, or is following a federal requirement that it write off the debt, seems to me to be irrelevant to what a consumer would normally want. However, now that the policy has been explained and linked, we need to know what assistance we can give OP.
 

jsn55

Verified Member
Dec 26, 2014
10,647
12,171
113
San Francisco
Lots and lots of words here. Bottom line ... what do you want to happen? All the personal stuff is irrelevant; it doesn't matter why you filed BK, we don't need any transcripts of your telephone conversations. What is your goal and how can we help you achieve it? Do you want another CC from BofA? Do you want your credit report cleaned up? We want to help you achieve your goal.
 
Oct 10, 2015
67
45
18
69
Upon your request the collection agency has to prove the debt in the same manner as the original creditor does.
If you did not realize that the debt was turned over to the collection agency and you were making regular payments to the original creditor then the collection agency must count your payments towards satisfying the debt. If all your payments were on time the collection agency does not have the right to demand a faster payoff.

The original creditor can still close your account if the law or if the terms and conditions int he fine print allow them to.
 
Aug 30, 2015
264
323
63
59
Upon your request the collection agency has to prove the debt in the same manner as the original creditor does.
If you did not realize that the debt was turned over to the collection agency and you were making regular payments to the original creditor then the collection agency must count your payments towards satisfying the debt. If all your payments were on time the collection agency does not have the right to demand a faster payoff.

The original creditor can still close your account if the law or if the terms and conditions int he fine print allow them to.
Upon becoming insolvent, all monies become payable and due immediately. That sort of wording is in just about every loan agreement. It doesn't matter if one has been making their payments on time or not..once there is a filing...that's it.
 
  • Like
Reactions: Neil Maley
Jun 24, 2019
889
1,796
93
73
Upon becoming insolvent, all monies become payable and due immediately. That sort of wording is in just about every loan agreement. It doesn't matter if one has been making their payments on time or not..once there is a filing...that's it.
I respectfully disagree. A contract clause accelerating a debt upon the filing of a bankruptcy is often unenforceable and in some cases actually unenforceable by statute. See 11 USC 365(e)(1). Of course, we are not lawyers here and don’t give legal advice.
 
  • Like
Reactions: JMLamb and Skippy
Sep 12, 2018
78
197
33
42
Did you list the credit card as a debt when you filed the bankruptcy? I filed for bankruptcy many years ago, and it was for chapter 7, so it might be different, but my lawyer told me that any debts I listed on my paperwork would immediately become non-collectible and be written off, even if they were current. Now, I am not a lawyer, so obviously take this for what it’s worth, but if you listed the BofA credit card on your bankruptcy, the court may have notified BofA that it was a non-collectible debt, and it could be that they legally had no other option than to write it off.
 
Aug 30, 2015
264
323
63
59
I respectfully disagree. A contract clause accelerating a debt upon the filing of a bankruptcy is often unenforceable and in some cases actually unenforceable by statute. See 11 USC 365(e)(1). Of course, we are not lawyers here and don’t give legal advice.
No, I'm not a lawyer. So you're saying that one of the big four banks, JP Morgan Chase, just happens to write this sort of thing in their cardholder agreements even if it is not enforceable? I wonder why they would do that. I don't want to get into some big discussion about it, but A: it appears B of A did this to the OP and B: it is in the Chase agreement...
==========
Your account will be in default if: 1) You do not pay at least the minimum payment when due; 2) You exceed your credit limit; 3) You fail to comply with this or other agreements with us or one of our related banks; or 4) We believe you may be unwilling or unable to pay your debts on time; you file for bankruptcy; or you become incapacitated or die. If your account is in default, we may close it without notice and require you to pay your unpaid balance immediately. We can also begin collection activities. To the extent permitted by law, if you are in default because you have failed to pay us, we will require you to pay our collection costs, attorneys’ fees, court costs, and all other expenses of enforcing our rights under this agreement.
=============
 

Skippy

May 30, 2019
751
1,865
93
@Bill__A BoA has similar language.

There is a distinction between between defaulting and becoming insolvent. Becoming insolvent is one way to default; however, as your noted from a Chase agreement, there are several others.

If the OP had a clean BK process, then the insolvency takes priority over a basic default and the debt can be wiped clean. The creditor stops collecting and writes off the debt.

Noting that, based on the OP's earlier posts, this may not have been a clean BK process. See my post #7 for some of the reasons why the BK filing and related actions may not have been clean.

We need more detail from the OP.
 
  • Like
Reactions: JMLamb
Jun 24, 2019
889
1,796
93
73
OP has not been here since February 21.

There are two different sets of laws/regulations being discussed here. One involves bankruptcy. The other involves what banks and similar institutions must do with debts which may be uncollectible. That is to keep banks from counting an uncollectible debt towards required capital. (The SEC and accountants preparing audited finacial statements may have similar concerns.)

When someone files for bankruptcy, you list your creditors. (The failure to list a ceditor may have consequences.) Creditors then get notice sent rom the bankruptcy system. A typical notice for what is called a "no asset" case, that is, a case in which distributions to ceditors are not expeced, is Form 309A. Here's a link: https://www.uscourts.gov/sites/default/files/form_b309a.pdf A notice in a Chapter 13 case, what our OP filed, is similar: https://www.uscourts.gov/sites/default/files/b_309i.pdf

The form advises creditors that the are barred from taking actions to collect debts. (That's called the automatic stay.) The form does not instruct the creditor to accelerate the debt or to write it off.

One result of an individual bankruptcy is that debts may be discharged, that is, they are no longer owed. (Some debts cannot be discharged, and some actions by the debtor may lead to a court ruling that a debt is not discharged.) In a Chapter 13 case, the debtor files a plan, and if approved by the Court, the debtor makes payments to a court appointed person (the Chapter 13 trustee), who then makes payments to creditors. Those payments may be negligible or may pay the debt in full. Upon completion, the debtor receives a discharge, and this no longer owes the debt. (Note the exception for certain non-dischargeable debts.)

I'm unaware of any instruction to creditors by the bankruptcy system about how they internally process all of this. There are banking regulations, cited above, which tell banks how they count debts like these. Often non-regulated businesses fail to write-off non-collectible debts, and their balance sheet gets clogged with receivables which are not collectible.

Our OP dismissed his bankruptcy case. Thus, the automatic stay no longer applied, and the bank could pursue whatever collection methods allowed by law and its contract, including acceleration of the debt.

Every day I read reports of cases about contract disputes in which an allegation is made that some contract language contradicts some law or public policy. Generally, no one regulates what people put into contracts. That is, there is no pre-approval process.

Our OP has not been here since February 21. He has not told us how we can help. He has written to B of A and received a prompt reply, although it was a response he did not care for. If he returns, and tells us what he wants, some of us here may be able to figure out a strategy for him.
 

Comicman

Jul 13, 2020
466
890
93
58
P Morgan Chase, just happens to write this sort of thing in their cardholder agreements even if it is not enforceable?
Companies do have things in their terms and conditions that courts have found that they are not able to enforce. I think the more important thing is that the customer thinks they are enforceable and let things drop.
 
  • Like
Reactions: SoCalTraveler