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Two of the nation’s biggest banks will finally put to rest the zombies of consumer debt — bills that are still alive on credit reports although legally eliminated in bankruptcy — potentially providing relief to more than a million Americans, the New York Times DealBook reported yesterday. Bank of America and JPMorgan Chase have agreed to update borrowers’ credit reports within the next three months to reflect that the debts were extinguished. The change by the banks emerged this week in Federal Bankruptcy Court in White Plains, N.Y., where the two banks, along with Citigroup and Synchrony Financial, formerly GE Capital Retail Finance, face lawsuits accusing them of deliberately ignoring bankruptcy discharges to fetch more money when they sell off pools of bad debt to financial firms. The lawsuits accuse the banks of engineering what amounts to a subtle but ruthless debt collection tactic, effectively holding borrowers’ credit reports hostage, refusing to fix the mistakes unless people pay money for debts that they do not actually owe. Lawyers with the United States Trustee Program, an arm of the Justice Department, are investigating whether the banks are deliberately flouting federal bankruptcy law.

Total bankruptcy filings in the United States decreased 12 percent in April 2015 over April of last year, according to data provided by Epiq Systems, Inc. Bankruptcy filings totaled 77,884 in April 2015, down from the April 2014 total of 88,163. Consumer filings declined 11 percent to 75,272 from the April 2015 consumer filing total of 84,762. Total commercial filings in April 2015 decreased to 2,612, representing a 23 percent decline from the 3,401 business filings recorded in April 2014. Total commercial chapter 11 filings dipped 41 percent to 405 filings in April 2015 from the 689 commercial chapter 11 filings registered in April 2014.

A unanimous U.S. Supreme Court ruled yesterday that a debtor in a chapter 13 bankruptcy proceeding may not immediately appeal the rejection of his proposed repayment plan, the National Law Journal reported yesterday. A bankruptcy court's order denying confirmation of the proposed plan is not an appealable final order, Chief Justice John Roberts Jr. wrote in Bullard v. Blue Hills Bank. The federal bankruptcy appeals statute authorizes appeals from final judgments in cases but also from “final judgments, orders and decrees … in cases and proceedings.” The federal circuit courts had split over what an immediately appealable "proceeding" is under chapter 13. "The relevant proceeding is the process of attempting to arrive at an approved plan that would allow the bankruptcy to move forward," Roberts wrote. "This is so, first and foremost, because only plan confirmation — or case dismissal — alters the status quo and fixes the rights and obligations of the parties." Read more. (Subscription required.)

Click here to read the Supreme Court’s opinion.

The Supreme Court declined yesterday to review a decision exposing debt collectors to liability within bankruptcies over their actions, leaving intact an Eleventh Circuit decision extending Fair Debt Collection Practices Act protections to a debtor, Law360 reported yesterday. Stanley Crawford had filed the adversary proceeding against LVNV Funding LLC, which had pursued and received a claim in Crawford's 2008 bankruptcy; LVNV had bought the debt from another company after it was charged off in 1999. Lower courts dismissed Crawford's complaint, but the Eleventh Circuit said in July that LVNV's claim on the money was too old under the FDCPA. The Supreme Court included no reasoning for its decision, simply including it in a list of denials of certiorari it released yesterday. The Eleventh Circuit said that unsophisticated consumers wouldn't anticipate or be able to defend effectively against the filing of a time-barred claim and that circuit precedent combined with the broad language of the act made it applicable in this case.