Do you think bankruptcy will end all your problems? Think again. Many big lenders have found ways to continue squeezing money out of consumers whose debts have been canceled by the courts. In fact, there is even a healthy market for such debts that have been supposedly canceled by the courts being actively bought and sold every day. Five of these companies trading debts are even publicly traded on the NASDAQ! So, how can you avoid these problems?

First, let’s take a look at how and why this practice occurs. A consumer that has $10,000 in credit card debt that was canceled may not technically owe the debt any longer; however, the credit card company may continue to report the discharged debt to credit bureaus as a live balance. This can continue to hurt the consumer’s credit rating and impact his interest rates and ability to obtain loans. And these kinds of things happen a lot more often than many people care to admit.

The practice of buying and selling discharged debts even has some judges confounded. The misconception is that discharged debt is worthless because it cannot be legally collected. However, the value lies in the creditors ability to negatively impact the consumer’s credit report long enough to force a payment just to remove the barrier. After all, the consumers only alternative is to go to court and spend money on a lengthy legal process to force change.

Many of these cases are making it to court these days with companies as notable as Capital One. However, the small number of cases brought to court keeps the strategy a profitable one for those involved in this unethical secondary market. While this may be a significant abuse in the industry, it is one that must eventually be stopped with new laws and harsh penalties for companies that do not immediately remove these debts from customers’ credit reports. Until then, it is a problem that will only persist and there is little consumers can do.