No regulation I know of allows a closed account such as you describe to be re-opened and charges made. The bankruptcy settlement is what likely closed the account and prohibits the bank from collecting any debt that was forgiven in the bankruptcy filing. The borrower knows the account is closed and that there is no credit available. The line was terminated in this process. Unless the bank and borrower agreed to re-open the account and under what terms, I would believe that if you cannot recover these funds from whom was paid, it will be charged-off in short order.