One can understand if a major U.S. credit card company forgets that one of its customers had earlier written off that company’s debt in bankruptcy. But forgetting this very important fact for 15,500 of its customers?!?

It is bad enough that Capital One lost track that its old debts had been legally written off (“discharged”). But in each one of these 15,500 cases it didn’t bother to check if the debts were discharged, and so it actually filed documents in subsequent bankruptcy cases asserting that the debts were still legally owed. Each of these “proofs of claim” were dated and signed by a Capital One representative, with the signature right next to this statement: “Penalty for presenting fraudulent claim: Fine of up to $500,000 or imprisonment for up to 5 years, or both.” Now, I don’t think anyone is alleging that Capital One is purposely and fraudulently chasing stale debt, but they sure are being awfully negligent in their internal recordkeeping, or maybe even reckless in blindly chasing debts without bothering to find out if they are still legally owed.

This whole ugly mess was uncovered by the “U.S. Trustee.” People filing bankruptcy may hear that the U.S. Trustee is somebody who is not on your side, mostly someone who can turn your Chapter 7 case into a Chapter 13 one if you don’t follow the rules. But its watchdog role is much broader–it “protects the integrity of the bankruptcy system by overseeing case administration and litigating to enforce the bankruptcy laws.“ Obviously, a creditor filing a document in a bankruptcy case saying that it is owed money when it not is in violation of the bankruptcy laws. Doing this in 15,500 cases is majorly bashing the integrity of the bankruptcy system, and causing havoc to “case administration.”

How so? Think about it. A creditor’s proof of claim is generally considered accurate unless somebody challenges it. The creditor usually attaches some documentation, which makes the debt look authentic. The debtor usually has little incentive to spend time or money on the issue because usually that proof of claim does not change how much the debtor has to pay, instead only how the creditors will divide up the money. When Capital One gets paid on a false claim in an asset Chapter 7 case or a Chapter 13 case, that inappropriate payment reduces the trustee’s payouts to all the other creditors, the amount of reduction depending on the size of each one of the other creditors’ claims. So now in 15,500 individual cases Capital One has to give back whatever money it actually received—amounting to $2.35 million—and the trustee in each case has to precisely recalculate how much each one of the other creditors was short-changed, and then cut checks for all those other creditors in those amounts. What a huge waste of time.

What does this mean for you? As to Capital One, if it is or was one of your creditors and you are (or will be) in either a Chapter 13 case or asset Chapter 7 case, have your attorney keep a close eye on any proofs of claim this creditor files. As to creditors in general, this is good reminder that creditors sometimes file inaccurate documents—purposely or not—in bankruptcy court. Proof of claims specifically, and other documents as well (such as motions for relief from stay) need to be scrutinized carefully, not just accepted as face value. Much of the time most creditors keep decent records and file accurate documents in court. Just don’t assume all of them do all the time. Especially Capital One.