You sometimes hear horror stories of when people file for Bankruptcy, such as creditors coming directly to their homes. Is this true?
The filing of a bankruptcy stops creditors from all collection actions. The debtor has swords and shields to defend against aggressive collectors who think they are above the law. Most legitimate debt collectors and creditors recognize the powers of the automatic stay and abide by the code. Besides the automatic stay of the bankruptcy code, consumers are protected from debt collectors who act badly by under the Rosenthal Fair Debt Collection Practices Act which prevents a debt collector from:
(a) The use, or threat of use, of physical force or violence or any criminal means to cause harm to the person, or the reputation, or the property of any person;
(b) The threat that the failure to pay a consumer debt will result in an accusation that the debtor has committed a crime where such accusation if made, would be false;
(c) The communication of, or threat to communicate to any person the fact that a debtor has engaged in conduct, other than the failure to pay a consumer debt, which the debt collector knows or has reason to believe will defame the debtor;
(d) The threat to the debtor to sell or assign to another person the obligation of the debtor to pay a consumer debt, with an accompanying false representation that the result of such sale or assignment would be that the debtor would lose any defense to the consumer debt
(e) The threat to any person that nonpayment of the consumer debt may result in the arrest of the debtor or the seizure, garnishment, attachment or sale of any property or the garnishment or attachment of wages of the debtor unless such action is in fact contemplated by the debt collector and permitted by the law; or
(f) The threat to take any action against the debtor which is prohibited by this title.
- 1788.11. No debt collector shall collect or attempt to collect a consumer debt by means of the following practices:
(a) Using obscene or profane language;
(b) Placing telephone calls without disclosure of the caller’s identity, provided that an employee of a licensed collection agency may identify himself by using his registered alias name as long as he correctly identifies the agency he represents;
(c) Causing expense to any person for long distance telephone calls, telegram fees or charges for other similar communications, by misrepresenting to such person the purpose of such telephone call, telegram or similar communication;
(d) Causing a telephone to ring repeatedly or continuously to annoy the person called; or
(e) Communicating, by telephone or in person, with the debtor with such frequency as to be unreasonable and to constitute harassment to the debtor under the circumstances.
These are some strong consumer protection laws. There are similar Federal Laws that protect the consumer. You may use both state and federal laws to protect you from aggressive collections.
Upon a client’s request and before the bankruptcy petition is filed, our office sends letters to the creditors and debt collectors stating all further communications regarding our client are to go through our office. This relieves our clients of the constant calls from creditors. The creditors usually contact us to verify representation and for an approximate date the bankruptcy petition will be filed. The calls to our clients stop. Usually, one letter stops the collection activities; the creditor makes a note on their collection file and waits for the Notice of Bankruptcy from the Court. Every once in a while it is necessary to take further action. If the consumer has to take further action there are statutory fees and damages for the consumer on a successful claim for wrongful collection.
One question I typically ask potential clients is if they know if any of their creditors are angry with them. An angry creditor is more likely to make problems or exhibit aggressive wrongful collection behavior. I believe the answer to this question is very important. It helps me prepare the client for possible opposition to the bankruptcy from the angry creditor and to make sure due diligence is taken regarding the information about the angry creditor and the debt. Preparation helps in resolving angry creditor issues quickly.
When our office receives the Order of Discharge we generate a special ‘closing letter’ with instructions and a call to action. The action is to obtain and review their credit report about 6 months after their discharge. By being proactive, when our clients’ financial ducks are all in a row, they are ready to purchase a home or automobile.