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If the bank has written off the debt and has provided you a 1099-c for tax purposes, it does not mean they cannot subsequently sell the debt off to junk debt collectors who can then try to collect on the debt. The debt is still valid unless the bank has sent you a letter stating that they are discharging you from liability for the debt and it is for this reason that the new bank is being cautious. If you have a letter stating you are no longer liable for the debt, then you need to take a copy of that letter and write a dispute to the three credit bureaus pursuant to the Fair Credit Reporting Act with a copy to BoA, demanding that negative remarks be removed from your credit report and the debt be classified as discharged for less than full payment. Unfortunately, this is going to delay your loan, because the credit bureaus have up to 45 days to review your dispute and make a decision as to whether or not the report is accurate.
If they refuse to remove the comment or modify it, then I am afraid your only other recourse is that you will have to sue BoA for discharging the debt and failing to report it as discharged in violation of the FCRA and under the FCRA you can seek all actual damages you suffered plus attorney's fees for them making an inaccurate report.
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