Get a collection notice after you’ve filed bankruptcy and after you’ve gotten a discharge, and it’s easy to be distressed.
You’ve taken the hard step to get a fresh start, and it appears not to have worked.
It’s easy to assume that the collector has a right to its money. Easy, too, to assume your lawyer must have screwed up if some creditor is still trying to collect.
Unlikely on both counts.
Far more likely that the collector is wrong. The collector now in your face probably bought the debt without any clue that you had filed bankruptcy.
Welcome to the world of distressed debt, where companies who can’t collect the money they are owed sell their rights in that debt to debt buyers.
Debt buyers pay pennies on the dollar for the debt, get little more in background on each account than a computer tape, and try to score with a few of the accounts in every batch they buy.
Defending your discharge
If this happens to you, fight back.
Your first step is to identify the creditor from whom the collector bought the debt. The name is usually found in the collection letter.
- Get out your bankruptcy papers and find the schedule or mailing matrix where all your creditors were listed.
- Send the collector a copy of the discharge order along with a copy of the schedule showing that the creditor was included in your bankruptcy case.
- Point out that the outfit that sold them your debt was listed in your bankruptcy.
Send your response to the collector by a method that gets you proof that the collector received it. That’s either USPS, return receipt requested, or overnight delivery.
Keep a copy of your letter and the enclosed bankruptcy papers.
In most instances, that stops the collection. Often the collector had no idea that you had filed bankruptcy.
When debt buyer won’t stop
If a collector continues to try to collect a discharged debt, you can call in the cavalry. Or rather, the bankruptcy judge.
After all, it’s the discharge order of the judge’s court that the collector is disrespecting.
Most judges don’t take kindly to being blown off. And they appreciate it that you’ve tried to solve the problem yourself, with information.
So, you need to file a motion for sanctions against the collector for its violation of federal law.
Your bankruptcy lawyer can help you do this. Or, another bankruptcy lawyer can take on the case.
Your action is filed in the court where your bankruptcy case was filed.
Once you’ve proved up your case, you are entitled to damages, including the attorneys fees required to get back into court for relief.
Setting up your case for damages
Make notes about your contacts with the offending debt collector. Keep track of any money you have to spend to fix the problem.
The better record you have of the damage done by the collector, the more likely you are to be made whole in bankruptcy court.
Check your credit report to see if the discharged debt is being reported on your credit report. If so, you may have additional elements of damage.
Be proactive and get the full measure of benefit from your discharge.
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