Creditors and debt collectors can be dogged in their pursuit of money. It’s one of the major sources of stress associated with passed-due debt. People who have every intention of paying what they owe begin dodging calls and throwing letters away unopened. As a consequence, they lose track of payments and responsibilities.
As stressful as bankruptcy can be, one of the major benefits is the relief from the calls and letters it offers. When you file for bankruptcy, a stay is automatically placed on all communication between you and any creditors. A creditor that contacts you after the stay is in place can be fined or even have damages assessed against them.
When Can A Creditor Contact Me?
A creditor can only legally contact you before you file for bankruptcy. After you file, you are protected from garnishment of wages, hounding through phone calls or letters, or any other attempt to collect on the debt.
The only exception is when the creditor has not been informed of the bankruptcy. Upon filing for bankruptcy, you should notify your creditors immediately.
It is also important to note that while the automatic stay protects you against most debt collection efforts, there are a few types of debt that can still be pursued. It does not stop criminal cases, most child support enforcement, and some types of eviction cases. The stay also does not apply to any debt incurred after bankruptcy has been filed.
Notify Your Creditors
The court usually notifies creditors after you file for bankruptcy. You provide the court with a list of your creditors and they inform each of them that you are seeking protection and discharge of debt through bankruptcy. There is also a meeting that is required between you and representatives of your creditors to determine the terms of your bankruptcy.
It is extremely important that you provide a complete list of creditors in your bankruptcy filing. If you do not, it can cause some complications, depending on the type of debt and whether you are filing for Chapter 7 or Chapter 13 bankruptcy.
In many cases, failing to include a creditor in your filing can mean that a debt is not discharged in bankruptcy. The creditor can continue efforts to receive payment of the debt, including legal action.
What Should I Do If A Creditor Contacts Me?
If a creditor contacts you after filing for bankruptcy, your first step should be to inform them of your bankruptcy status. While the court should have notified all your creditors, it is possible that some creditor was missed, or that your creditor has passed that information along to all interested parties. This is particularly likely when a debt collector has become involved.
Upon being notified, the creditor should stop all attempts to contact you or collect the debt. They should also return any money that may have been garnished after bankruptcy filing or otherwise correct the violation.
If they continue to contact you or attempt to collect the debt, they are in violation of the stay. You should immediately contact the bankruptcy court and inform them of this violation. You should also keep records of any attempt to contact you, including keeping a call log, copies of any correspondence, and any other information.
Creditors are most likely to continue trying to collect a debt, even if you are in the midst of bankruptcy, in three cases:
- If you file bankruptcy without the aid of a lawyer, creditors often assume you are less aware of your rights and the protections associated with bankruptcy.
- If a creditor is a high-risk lender, such as a payday loan company, they are more likely to pursue you despite the stay.
- If a debt collector is involved, they are also more likely to attempt to pursue you.
When creditors do violate the stay or other aspects of bankruptcy protection, there are some ways they can be punished. A creditor that violates the stay can be held in contempt of court. Fines may be assessed against them, and the court may decide to have them pay attorney’s fees. Damages may even be assessed, depending on the severity of the violation.
Finally, if a creditor pursues you during bankruptcy, you have a right to sue them. They are most often violating some aspect of law regarding fair business and trade practices. The details will vary depending on where you live and what state you are filing bankruptcy in. This lawsuit will be a separate proceeding from your bankruptcy.
Throughout this process, it is a good idea to keep your own set of records, backed up by documentation whenever possible. You are also protected from being pursued after your bankruptcy is discharged and have many of the same rights and options in that case.
Bankruptcy can be an option when you find yourself in over your head and constantly pursued by creditors.
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