Many clients tell me that the collection calls and threats they receive from creditors and collection agencies are not very pleasant. No surprise there. Before a bankruptcy is filed, some creditors will do just about anything to get you to pay. Often, collectors are paid a commission on funds they collect. Some collectors are mean and vicious – they get you to thinking that it is better to pay them and skip a meal than to have to talk to them again. They threaten jail and lawsuits, etc. (and other things that violate the law). Others are nicer – sometimes because they genuinely understand and some because it works to get you to pay them money.

The key thing to understand is that just because a creditor is mean and vicious before you file it does NOT mean they will be a problem after you file. In almost every case, once the bankruptcy filed you never hear from the creditor again. The reason for this is twofold. First, when you file the bankruptcy, the “automatic stay” comes into place for normal debts. The “automatic stay” is a provision of the United States Bankruptcy Code (11 USC § 362). The “automatic stay” provides that the filing of a bankruptcy operates as a “stay” or injunction against all collection actions. That includes telephone calls, letters, lawsuits, garnishments and so on. With very limited exceptions, all collection action MUST stop.

Further, a creditor’s failure to terminate collection activities subjects the creditor to a claim for damages including attorney fees and costs. (11 USC § 362(k)). Specifically, the Code provides: “an individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.” Most creditors understand this and, therefore, stop all collection efforts. Sometimes a creditor might not know you filed bankruptcy. In that case, you tell them you filed, give them the case number and then they should politely terminate the collection effort. If they don’t stop, they open themselves up for a damage claim.

After a bankruptcy case completes, a Discharge Order is usually entered that discharges a debtor of any personal liability for “normal” debts, such as medical bills, credit cards, personal loans and so on. (Exceptions to discharge include past due child support and so on. You can read more about debts excepted from discharge here.) With the entry of the Discharge Order, the Bankruptcy Code again prohibits collection activity for the discharged personal liability – forever. 11 USC § 524(a). This is called the “post discharge injunction”. If a creditor violates the post-discharge injunction, they again open themselves up for a claim for damages for violating court order.

The fact that creditors are mean and vicious before you file bankruptcy does NOT mean they will be a problem after you file. You just have to know the law, your rights and protections. We do. We’ll protect you and your rights.

THEY MAY OWE YOU MONEY!

Furthermore, sometimes a collector’s actions violate the federal Fair Debt Collection Practices Act (FDCPA). The FDCPA protects consumers form certain collection practices. If the collector violates the FDCPA, then you have a claim against them for damages. As a result, after you receive your Discharge Order, you can pursue the collector on their violations!

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