If you've fallen behind on your mortgage, not in a position to make monthly payments on your credit card, or are facing repossession of your vehicle, filing for bankruptcy can be the most effective strategy to stop creditor harassment. Bankruptcy triggers an automatic stay, which requires creditors and collection agencies to stop foreclosure and collection conduct against you. Moreover, after you file for bankruptcy, your creditors should only contact you through your attorney. At the Los Angeles Bankruptcy Attorney, we handle all issues and concerns related to bankruptcy. If your creditors continue to contact you, we can help you to file for sanction for violating the automatic stay.
What is Creditor Harassment?
When dealing with a debt collector, it is essential to know what they can and cannot do. Per the federal Fair Debt Collection Practices Act (15 U.S.C. § 1692), it is illegal for a debt collector to engage in abusive conduct. The FDCPA covers debt collectors working for collection agencies and debt buyers who purchase debts and collect on them.
If you are experiencing any of the following, then you are a victim of unfair debt collection practice:
- Your creditor calls you at unreasonable hours. According to the Fair Debt Collection Practices Act, a creditor should call you between 8:00 A.M. and 9:00 P.M. in your local time zone.
- Contacting you after sending a written notice that you refuse to clear the debt or requesting to end communication. The only permitted communication after the notice is that the creditor will take legal action
- Numerous calls from the debt collector to harass, abuse or annoy you
- Contacting you after filing for bankruptcy
- Contacting you at your place of work
- Contacting a third party other than your attorney or spouse
- Demanding amounts that weren't agreed in the initial agreement
- Using deception or misrepresentation when collecting the debt
- Publishing your name or address on a bad credit list
- Using profane or abusive language
- Claiming to be a lawyer when they are not
- Placing a call to you without identifying themselves as debt collectors
Fortunately, you can stop this harassment and maybe be awarded compensation.
Most victims of unfair debt collection acts are frustrated, often due to divorce, medical issues, and loss of employment. Heaping harassment can leave you feeling defeated and without the stress to bring the collectors to justice.
As a debtor, you have both rights and remedies. If the bank is intimidating you, you need to file bankruptcy.
Bankruptcy and Automatic Stay
Once you file for bankruptcy, you get a tool- automatic stay. An automatic stay goes into effect after you file for bankruptcy. It is an injunction that makes it illegal for your lender to take any debt collection action while you are in bankruptcy.
Additionally, the creditors are prohibited from:
- Foreclosing on your house
- Sending you emails, letters, or texts
- Continuing or filing a lawsuit
- Repossessing your collateral
- Garnishing your wages
You will notice a significant and immediate drop in the activities mentioned above after you bring your bankruptcy case. However, some lenders, mainly local shops and huge bureaucratic firms, have issues assimilating the bankruptcy notice into their system. It may take time. Sometimes an action by an experienced bankruptcy lawyer or sanction can show the lender the importance of the proceeding and the necessity to cease harassing you.
Most people overlook the continuous collection efforts during their bankruptcy case and assume it is not essential, and there is no need to correct it, or it will come to an end. However, chances are these lenders did not receive the message and will still try to collect discharged debt after discharge is entered.
Please note, the automatic stay does not cover all debts. If you think the automatic stay does not cover your debt, you need to speak with a competent bankruptcy attorney. The lawyer will evaluate your case and then tell you of your options. The automatic stay will not prevent:
The Internal Revenue Service (IRS) will audit you, demand tax returns, give you a tax deficiency notice, issue a tax assessment, or ask for the payment of the assessment. Nevertheless, the stay temporarily stops the Internal Revenue Service from seizing your income or property or issuing tax lieu. Whether you will be accountable for your tax after bankruptcy will hinge on whether your tax will be discharged in Chapter 7 or you pay your loans in Chapter 13.
An automatic stay will not stop criminal proceedings. For example, if you were found guilty for issuing a bad check and are required to pay fines and perform community service, you must pay the fines and do the community service.
Filing for a bankruptcy case will not stop a lawsuit against you seeking to prove paternity, collect or modify alimony or child support.
A Loan from a Pension
Even with the automatic stay, the money will be taken from the income to clear loans from pensions, such as Individual Retirement Accounts (IRAs) or work-related petitions.
In case you had a bankruptcy case that was awaiting in the previous year, the automatic stay will automatically terminate after thirty days unless
- your trustee,
- the United States Trustee,
- your creditor, or
request the stay to go on and establish that the new case was brought in good faith. Should the creditor file a motion to lift the automatic stay pending in your prior case, the bankruptcy court will assume that you responded out of bad faith. As a result, you will be required to overcome the presumption so that you can get the stay's protection in the current case.
Once the bankruptcy court enters a discharge order, the stay becomes a permanent discharge injunction per 11 U.S.C. § 524. That means the lender whose loan has been discharged cannot take any debt collection action. However, there are situations that the collectors can reach you and try to collect your debt.
The following are the actions your creditor can take after the discharge or after filing bankruptcy:
- Pressuring you or suggesting that you enter a new loan and replace the previous one
- Integrating your old debt with new debt (For instance, when refinancing your car loan)
- Refusing to indicate that your debt is discharged on the credit report until you clear the loan
- Trying to collect debts which you verbally agreed to clear
- Sending you a notice of action on discharged debts
- Bringing a lawsuit
- Repossessing/ foreclosing a property
Dismissed vs. Discharged
To know if your creditor is lawfully justified and when you are breaking the discharge injunction hinges on satisfying specific elements. If your case is dismissed, your creditor is entitled to continue with the collection efforts.
Generally, your bankruptcy case will either end in a dismissal or discharge. A discharge is the intended outcome since it relieves the debtors of the responsibility to pay dischargeable debts, such as personal loans, mortgage, car loans, medical bills, and credit cards.
Some of the reasons why a bankruptcy case can be dismissed include:
- Failing to complete your official paperwork
- Failing to give the trustee tax returns
- Failing to attend the Section 341 meeting of your creditors
- Refusing to work together with trustees
All the above reasons can cause a Chapter 13 bankruptcy repayment plan to be dismissed. Other reasons include failing to make payments or get confirmation of the repayment plan.
More often than not, when the bankruptcy is dismissed, it is as if you did not file for bankruptcy. You will not only lose the automatic stay's protection but also creditors can resume the collection actions.
If your creditor is still attempting to collect the debt after the case has been discharged, call a bankruptcy lawyer immediately. The lawyer will assist you in determining if your debt was discharged. If the case was discharged and the debt collector is violating the discharge injunction, the attorney will reach the collectors (it can be either formally or informally) demanding them to stop the collection conduct.
If the creditor continues to harass you, the attorney could ask the bankruptcy court to reopen the case and sanction the lender for the violation. Your attorney can also request the court to order the lender to compensate for the damages you have suffered as a result of the harassment.
Not all debts are dischargeable in a case. While some are not discharged automatically, others will survive in the event one party requests the bankruptcy court to say that the loan isn't dischargeable. The discharge court order will not highlight the dischargeable debts, but your skilled attorney should be in a position to illuminate you. If your debt isn't dischargeable, the collector will resume the collection efforts once the discharge order is entered.
Common debts that are not discharged include:
- Income tax
- Student loans
- Debts acquired as a result of driving under the influence
- Restitution and fines in criminal cases
- Past due alimony and child support
The following debts won't be discharged should your lender oppose the discharge:
- Debts resulting from malicious and willful conduct
- Current credit charges for luxury services or goods or cash advances
- Debts because of theft or embezzlement
- Debts not outlined on the bankruptcy paperwork
Should you enter into debt or open credit accounts after filing a bankruptcy case, the odds are the debt will not be discharged.
Additionally, your lender will try to collect the debt. If a debtor entered a debt linked to the Chapter 13 bankruptcy case, they should include the debt in the repayment plan. The debtor will pay the debt while still in bankruptcy.
Life After Bankruptcy
When the bankruptcy period elapses, the court will discharge most of your debts. However, that doesn't mean that your creditors will stop attempting to collect debts from you. If a debt with a given lender was discharged, that lender should not continue to reach you concerning the loan. You have a right to take legal action against the lender who does so. Moreover, the court will issue sanctions against the lender for contempt. Your bankruptcy lawyer should help you explore the options for taking the necessary action.
Keeping Your Assets After Bankruptcy Period has Elapsed
Even if your mortgage or car loan will be discharged in Chapter 7 bankruptcy case, your creditor is entitled to dispose of your collateral. In case you want to keep your collateral, you will be required to pay the entire loan even after the bankruptcy period has elapsed.
You can choose to enter a reaffirmation agreement where both you and your lender agree that your loan won't be discharged (you'll continue to pay the loan). If you fail to make payments, the lender will engage in collection actions as if your loan was not included in your bankruptcy case.
What Happens When Your Creditor Violates the Automatic Stay?
A violation of the automatic stay happens when your creditor tries to collect a pre-bankruptcy debt when an exception to the automatic stay doesn't apply, and the court hasn't modified or terminated the stay order.
Discussed below are the various options you have if the creditor violates the stay:
Tell Your Creditor about the Bankruptcy
Usually, telling the debt collector of the automatic stay will make the collector rectify the violation. Often a collector who does not know of the case will stop contacting you. For example, if a lender garnishes a debtor's wages after a bankruptcy case is brought, the wages should be returned immediately.
Inform the Bankruptcy Court
If your creditor doesn't stop and correct the violation, you should notify a bankruptcy court. The bankruptcy court will sanction the creditor for the violation as long as the collection is willful. Collection action is willful if:
- The stay was effective and was broken
- The debt collector was aware of the bankruptcy and either failed to correct their action immediately after knowing of the case or ignored the court order
- The debt collector acted intentionally
The automatic stay violation doesn't depend on the creditor's aim to break the order, but the creditor's intent to begin or continue collection in violation of the court order.
Typically, the bankruptcy court will sanction the violation under its power of contempt. It could impose a fine, analyze attorney's charges, and order the creditor to pay the damages.
Be sure to take notes of the violation immediately it occurs. Take note of what took place, when it occurred, who witnessed the harassment, and what the creditor said. Also, have another individual present during your future communication with the debt collector. It will function as proof in the bankruptcy court.
Bring a Lawsuit
Should the debt collector continue to violate the stay, they might be violating other laws, such as:
- Fair Credit Reporting Act
- State fair debt collection practice laws
- The federal Fair Collection Practices Act
- State unfair trade practice laws
To collect damages or penalties under a new law, you will be required to bring another lawsuit.
Bring a Complaint with the Federal Trade Commission
FTC is the agency that oversees debt collection agencies. In the complaint:
- Include the name of the collection agency, collector's name, times and dates of the conversation and witness's names
- Attach copies of all offending materials the collector has sent you
Then send a copy of the complaint to the state authority that controls collection agencies in California.
Finally, send a copy of the Federal Trade Commission complaint to your original lender and the debt collection agency. The original lender could offer to cancel your debt.
After filing the complaint, do not expect an instant outcome. The FTC could take a few steps to sanction the collection agency if it has received other complaints.
What are the Different Damages Awarded in Unlawful Debt Collection Practices?
If the debt collector breaks the FDCPA and you take legal action against them, you could recover the following damages:
- Compensation for physical distress- Some people suffer physical damage, such as stress-related heart condition, skin rashes, and migraine headaches due to numerous debt collections letters and calls. If the health condition is related to the creditor harassment, your attorney should document the concerns.
- Lost wages compensation- You are entitled to receive lost wages if the collector calls your place of employment.
- Attorney's cost- If you successfully prove that the creditor harassed you, the bankruptcy court could order the reimbursement of the attorney's charges. This compensation is essential, mainly because without it, you might be unable to take legal action against the debt collector.
Find an Los Angeles Bankruptcy Attorney Near Me
The last thing you need as a debtor is receiving numerous calls from your creditor and debt collectors. To think and work towards getting answers to your financial challenges, you may be required to leave your phone disconnected. Nevertheless, the creditor could then begin to call at work or your loved ones and ask them about your whereabouts and financial situation. One of the ways to stop the harassment is filing for bankruptcy. To learn more about creditor and debt collector harassment, speak to our skilled legal team at the Los Angeles Bankruptcy Attorney at 424-285-552. We can help stop the harassing conduct as well as work with you to address your financial challenges.