Discharge Violations and Violations of the Automatic Stay in Bankruptcy
Have you or someone important to you recently filed a petition for bankruptcy? Filing a petition for bankruptcy provides the debtor with an immediate period of relief from creditors in the form of the automatic stay. It is one of the fundamental functions of bankruptcy: the Court informs the debtor’s creditors that the debtor is, flatly, off-limits until the bankruptcy has been sorted out. The automatic stay itself is a court order prohibiting creditors from contacting the debtor. This prohibition on contact includes sending statements or demand letters, suing the debtor, or taking any other collection action for debts accrued prior to the filing of the debtor’s bankruptcy petition.
Generally speaking, once a bankruptcy case has been wrapped up, the debtor’s debts are discharged and the Court issues a discharge injunction. Once those debts have been discharged, creditors cannot attempt to collect those debts. Those debts are no longer valid.
A problem sometimes arises, though, in that some debt collectors do not respect the automatic stay or the discharge injunction. These debt collectors contact debtors during the automatic stay and after debts have been discharged by the Court. These collectors’ actions are illegal, in direct violation of a court order, and the debtor has legal recourse against those debt collectors.
Unfortunately, many times, these debt collection activities are invisible to debtors. The debt collection activities can take the form of checks on credit history without the permission of the debtor. These activities have a harmful effect on the debtor’s credit. Some debt collectors run several consistent credit checks on the debtor in an attempt to collect debt that has already been discharged. These credit checks are harmful to debtor’s credit, but a debtor is unlikely to know about this harm unless the debtor is closely monitoring his or her credit score and activity.
These credit checks for discharged debt are illegal, harmful, and expensive. Over time, these credit checks effectively can cost a debtor thousands of dollars because the checks harm the debtor’s credit score. Among other things, a reduced credit score can result in a denial of credit, increased credit card rates, a higher mortgage rate, and loss of employment opportunities, as many employers check credit history before hiring.
If you or someone you know has recently filed for bankruptcy, you have the right not to be harassed in this way by creditors. Once you have filed your bankruptcy petition, collection activity should stop immediately, including checks on your credit history.
If you continue to receive collection letters, statements, calls, or continued reporting of your discharged debts to credit agencies, then you should seek legal counsel immediately.
If you receive calls attempting to collect a discharged debt or during the automatic stay, you should document the time of those calls and who called you. If you receive any documents, such as collection letters or statements in an attempt to collect a discharged debt, be sure to keep those documents, as they can serve as important evidence in an action against your debt collectors. If you receive regular reports on your credit score and detect any irregular activity, you should print or otherwise keep record of those reports.