Debt Collection After a Bankruptcy Discharge
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A bankruptcy discharge order is a court order that stops creditors from ever being able to collect on dischargeable debts. Despite this powerful court order, some collection agencies or creditors try to collect on discharged debts, which is illegal. It’s important to know which debts creditors can still contact you about after bankruptcy and how to stop debt collectors that violate the discharge order.
Written by the Upsolve Team. Legally reviewed by Attorney Andrea Wimmer
Updated May 9, 2022
Many people who file bankruptcy experience tremendous relief when they get their bankruptcy discharge order. This powerful debt relief tool stops creditor harassment on certain debts for good. The bankruptcy discharge order permanently forbids creditors from trying to collect a discharged debt. Some collection agencies and creditors attempt to collect debt despite a bankruptcy court order telling them to stop. It’s illegal for creditors or collection agencies to call you or correspond with you to try to collect a discharged debt.
That said, not all collection phone calls are illegal because some types of debt can be collected after bankruptcy. We’ll help you recognize the difference and learn how to stop debt collectors that violate a bankruptcy court order.
Collection Activity After the Bankruptcy Discharge
Creditors and collection agencies must stop collection efforts for debt discharged in bankruptcy. Even so, collection efforts often continue after bankruptcy. Congress made laws to stop this activity, and the laws were added to the Bankruptcy Code. These laws set sanctions for creditors trying to illegally collect a discharged debt. Courts can order a creditor to pay attorney fees, compensation to the bankruptcy filer, and penalties for discharge violations.
Debt that’s been discharged can’t be pursued, but collection efforts can continue for non-dischargeable debt and post-bankruptcy debt.
Pre-Bankruptcy Debt and Post-Bankruptcy Debt
Bankruptcy only discharges debt incurred before the date you filed your bankruptcy petition. Any debt from after you file your bankruptcy petition is considered post-petition debt. Debt collectors can still go after you for post-petition bankruptcy debt. The post-petition debt can be brought up in a future bankruptcy case, but you’ll have to wait several years before you can file bankruptcy again.
What Type of Collection Activity Does a Bankruptcy Discharge Prohibit?
With few exceptions, debt collectors aren’t allowed to call you, send you letters, or talk to you in person about any debt that was discharged in bankruptcy. Debt collectors for discharged accounts aren’t allowed to sue you for the debt discharged in bankruptcy, garnish your wages, or garnish your bank account. The debt is gone!
What To Do if a Debt Collector Pursues a Debt After Discharge
Once your bankruptcy case is processed the court issues a discharge order, which wipes out your dischargeable debt. All the creditors you listed in your bankruptcy paperwork will receive a copy of the order. Sometimes this bankruptcy discharge notice gets lost in the mail or a debt buyer doesn’t research the history of an account. In this case, a debt collector may call you. Is that legal?
The courts recognize the difference between one reasonable phone call and relentless collection activity or creditor harassment. Make sure you give a first-time caller a warning and follow these steps:
Step 1: If you have a bankruptcy attorney, tell the debt collector to contact your attorney. If you don’t have a bankruptcy lawyer, identify the creditor and make sure it’s not a scam call. Get the name of the person you’re talking to, and the company name, address, and phone number. Ask for the account number and the alleged amount owed. Record the date and time of the call.
Step 2: Simply tell the debt collector you have an order of discharge from the bankruptcy court and give them the bankruptcy discharge date and case number. Offer to fax or mail a copy of the bankruptcy order that discharged the debt, and then tell them not to contact you again. Keep the conversation short.
Step 3: If the debt collector persists despite a warning, you can file court papers for a case against the creditor. It may require an adversary proceeding, and you’ll probably have to reopen your bankruptcy case, so many people choose to hire an attorney. The good news is that the creditor must pay attorney fees for discharge violations, not you!
Creditors Have To Pay Your Attorney Fees if You Take Legal Action
Taking legal action for a creditor violation won’t make you rich, but it shouldn’t cost you anything and creditors will stop hounding you. They know they can get stuck paying attorney fees, penalties, and paying you money for damages.
Violations of a bankruptcy order of discharge carry heavy penalties for creditors. The courts take disobeying a court order seriously. Your injunction discharge order permanently protects you from illegal creditor collection activity. If a creditor is harassing you over debt that was discharged in bankruptcy, talk to a bankruptcy attorney and find out what actions you can take to stop illegal collection activity and other discharge violations.
Your bankruptcy discharge order is your power to block collection activity. Use the injunction to protect yourself and others from illegal collection activity so you can finally get the fresh start you deserve!
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What About My Credit Report?
After you get your order of discharge, the court clerk mails a copy of the order to all creditors listed in your bankruptcy paperwork. This is their notice of the discharge. They are obligated to follow the court’s injunction order if the debt was discharged. The creditors must report accurate information to the credit reporting bureaus, abiding by the regulations under the Fair Credit Reporting Act (FCRA). This doesn’t always happen. Each discharged account should have a $0 balance and show that the account was discharged in bankruptcy. If you signed a reaffirmation agreement, that should be noted on your credit report.
Credit reporting agencies and account creditors are required to report the information. You can get a free copy of your credit report and check for inaccuracies. Inaccurate reporting could be a violation of the discharge.
Check your credit report for the following after bankruptcy discharge:
A balance other than $0 for unsecured discharged debt
An inaccurate balance for secured debt
Inaccurate balance after signing a reaffirmation agreement
No mention of a bankruptcy discharge
A “charge off” instead of a discharge
Hard pulls on your credit report
It’s a good idea to talk to a bankruptcy attorney about a violation to discuss legal action and to see what steps you can take to repair your credit report.
So How Do I Get a Bankruptcy Discharge?
To get a discharge through bankruptcy, you must have a bankruptcy case. To file bankruptcy, you have to meet certain requirements and file a bankruptcy petition. Consumers usually file either Chapter 7 or Chapter 13 bankruptcy. You’ll want to look at your income, debts, and what assets or property you own to decide which is best for you. An attorney can help you or you can file on your own. Upsolve has a free filing tool to help you file a Chapter 7 bankruptcy without an attorney.
In addition to filing a petition for bankruptcy, you’ll have to fill out several bankruptcy forms, pay a filing fee, take required courses, and have a meeting with your bankruptcy trustee before the discharge can be entered. Once you do all this and complete any required repayments, the bankruptcy trustee and judge give a seal of approval. Then your discharge will be granted!
What Is a Bankruptcy Discharge Order?
An order of discharge in bankruptcy officially ends your personal liability on certain debt. It also orders a permanent stop to collection actions. In a Chapter 7 bankruptcy, the order is usually granted 60-90 days after the meeting of creditors. In a Chapter 13 bankruptcy filing, the order of discharge is granted after the repayment plan is complete. The repayment plan usually takes three to five years.
What Debt Is Dischargeable Debt in Bankruptcy?
Chapter 7 and Chapter 13 bankruptcies help filers get consumer debts discharged. You can get credit card debt, personal loans, medical bills, old utility bills, old cell phone bills, car loan charge offs, back rent, and other types of unsecured debt discharged in bankruptcy.
What Debt Will I Be Stuck With Even if I File Bankruptcy?
The order of discharge in bankruptcy doesn’t get rid of all types of debt. The debt you’re stuck with is called non-dischargeable debt. Here are some common examples:
If you have child support, alimony, or other types of court-ordered domestic support obligations, you must continue making those payments.
Bankruptcy won’t resolve government-backed student loan debt unless you can qualify for a hardship.
IRS debt generally won’t be discharged, but there are some exceptions for old income tax debts.
Debt stemming from a DUI-related personal injury or property damage case will still be owed.
If you owe court fines and fees, whether it’s related to a DUI or not, you’re not going to get that debt discharged in bankruptcy.
Also, secured creditors, such as your mortgage company, will have a right to their property.
Bankruptcy Injunction, What’s Your Function?
Not only do you get your debts discharged in bankruptcy (say goodbye!), but you get a permanent discharge injunction. An injunction is a court order that prohibits someone from doing something. You can think of it as a judge putting up a concrete roadblock. An order of discharge in bankruptcy is an injunction.
As we mentioned above, an order of discharge in bankruptcy prohibits creditors and collection agencies from collecting dischargeable debt and voids your personal liability for the debt. It will be recorded on your credit report, and it will end the automatic stay that started when you filed your bankruptcy petition.
The Automatic Stay Is Temporary. The Discharge Is Permanent.
When you first file a Chapter 7 or Chapter 13 bankruptcy, an automatic stay goes into place. The automatic stay immediately puts a stop to debt collection activity, foreclosures, repossessions, evictions, and wage garnishments, but creditors can object to the stay. Unless it’s lifted, the automatic stay remains in place during the bankruptcy process.
The stay is a red light for collection activity. When the order of discharge arrives, the automatic stay ends. Non-dischargeable debt gets a green light (collection activity begins again), and discharged debts get a roadblock (no collection activity allowed, ever).
In bankruptcy, some debts are dischargeable and others are non-dischargeable. After you receive the court-ordered bankruptcy discharge, creditors, debt collectors, and collection agencies can’t contact you to try to collect on dischargeable debts. This includes medical bills, credit card bills, old utility bills, and the like.
If a creditor attempts to collect on a discharged debt and is persistent in their efforts, you may want to seek legal advice from an experienced bankruptcy attorney. You have legal protections under bankruptcy law and the Fair Debt Collection Practices Act. Creditors and debt collectors that violate the law can be punished with fines and other sanctions.