When you file bankruptcy, you have a right to expect relief from collection harassment. The automatic stay prevents most creditors from pursuing ALL collection actions immediately upon filing in most bankruptcy cases, and the bankruptcy discharge order makes that prohibition permanent–at least, as to debts that were discharged in the bankruptcy.
Unfortunately, some people who have successfully completed their bankruptcy cases still have problems with past creditors, including:
- Continuing collection efforts by the original creditor
- The debt still being reported as delinquent with an outstanding balance on consumer credit reports
- Contact from debt buyers who purchased the discharged debt or a debt collector assigned by the original creditor
Sometimes, those contacts are honest mistakes. In other cases, though, debt collectors know exactly what they’re doing, and are hoping to trick or pressure you into paying a discharged debt. Unfortunately, not all collection efforts on discharged debt are honest mistakes. Some creditors and debt collectors knowingly attempt to collect debt in violation of the discharge order, and there are even debt buyers that buy up discharged debt for pennies on the dollar, hoping to make a profit by collecting on a small percentage of that debt.
Some of the ways these collectors and debt buyers attempt to collect on discharged debt include:
- Sending confusingly-worded collection letters that don’t actually claim that you’re still legally obligated to pay the debt, but invite you to settle for a portion of the original balance
- Claiming that the discharge order doesn’t apply to them, because they are not the original creditor and were not included in the schedule of debts
- Misreporting discharged debt to credit reporting agencies in hopes that you’ll pay it off as the quickest means of resolving a negative credit entry
Fortunately, the law protects you from efforts to collect discharged debt.
The Bankruptcy Discharge Order
The bankruptcy discharge order is a court order
Like any other court order, the bankruptcy discharge order has the force of law. Any creditor or debt collector who acts in violation of the order may be found to be in contempt of court, and may be sanctioned by the bankruptcy court. In extreme cases, these sanctions may include payment of damages and/or attorney’s fees to the bankruptcy petitioner.
The U.S. Bankruptcy Code even makes it easy for a debtor who has received a discharge to assert his or her rights. While many violations of consumers’ financial rights require the filing of a separate lawsuit, discharge order violations can be addressed by petitioning to reopen the bankruptcy case–without a filing fee.
Other Consumer Protection Statutes
Many attempts to collect on discharged debt also violate one or more state or federal consumer financial protection statutes. For example, the Fair Debt Collection Practices Act (FDCPA) prohibits misrepresentation of the legal status of a debt. We also want to see all collection letters that our clients receive. There are certain requirements about what is allowed to be contained in collection letters. Please see these blog posts here and here.
Also, the Fair Credit Reporting Act (FCRA) requires credit reporting agencies and those furnishing information to them to investigate disputed items and make deletions or corrections as necessary. These actions are more complex than pursuing sanctions for a bankruptcy discharge violation but it is an area of law that our law firm handles. In fact, if our clients’ credit reports are not fixed after a bankruptcy discharge, then we want to look at their credit reports so that we can ensure our clients are in the best financial shape possible. Please take a look at this blog post which explains in detail how to fix a credit report after a bankruptcy discharge.
It is important to note that both of these federal consumer protection statutes, the FDCPA and the FCRA, provide for statutory damages, actual damages, and attorney’s fees where there is a successful case.
Be Prepared to Protect Yourself
It would be nice to assume that once your debts were discharged, you’d never hear from one of those old creditors again. Unfortunately, that’s not always the case. The Consumer Financial Protection Bureau’s (CFPB) complaint database includes more than 8,000 reports from consumers regarding attempts to collect debt they say was discharged in bankruptcy. Thus, it is important that you anticipate and prepare for this possibility by:
- Asking your attorney what you should do if you receive collection calls after bankruptcy and letting your attorney know about the collection contact as soon as you get it
- Keeping a copy of your discharge order readily available so you can provide information or a copy to creditors or collectors
- Monitoring your credit report after bankruptcy and promptly disputing any discharged items that continue to appear (or reappear) with a balance
The first step toward securing the protection of the bankruptcy discharge order is to speak with an experienced local bankruptcy attorney. Why not get started right now? The initial consultation is free. Our firm has been helping people with bankruptcy for the past twenty-five years. We don’t leave them, however, once the case is over and the bankruptcy is discharged.
We want to know immediately if our clients are being contacted to pay a debt after a bankruptcy discharge or if they are receiving harassing phone calls or letters from creditors or debt collectors on debts that were listed in the bankruptcy. If you find yourself in this situation, please reach out to us to see if we can help you.