Debt Collection After a Bankruptcy Discharge

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Written by the Upsolve Team.  Reviewed by Attorney Andrea Wimmer
Updated July 22, 2020

Summary

A bankruptcy discharge order permanently forbids creditors to try to collect discharged debt. Some creditors and collection agencies try to collect debt despite a bankruptcy court order telling them to stop. Phone calls and letters for discharged debt are illegal collection practices. Not all collection phone calls are illegal, and 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.

A bankruptcy discharge order permanently forbids creditors to try to collect discharged debt. Some creditors and collection agencies try to collect debt despite a bankruptcy court order telling them to stop. Phone calls and letters for discharged debt are illegal collection practices. Not all collection phone calls are illegal, and 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. 

What is a Bankruptcy Discharge Order? 

An order of discharge in bankruptcy officially ends your personal liability on certain debt and 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 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 the non-dischargeable debt. 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. 

What’s 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. 

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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 is 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). 

So How Do I Get a Bankruptcy Discharge?

To get a discharge through bankruptcy, you must have a bankruptcy case. To file bankruptcy, you first take a credit counseling course 180 days before filing your bankruptcy petition. After course completion, you can file a petition for bankruptcy. An attorney can help you or you can file on your own. Upsolve has a website app to help you file a Chapter 7 bankruptcy without an attorney. 

A Chapter 7 bankruptcy is subject to income limits, and you must take a means test to see if you qualify. If you have steady wages and assets, you’re probably better off hiring an attorney at a law firm to help you file a Chapter 13 bankruptcy and work out a repayment plan. 

In addition to filing a petition for bankruptcy, you’ll fill out several bankruptcy forms and provide information on your income, expenses, assets, and debts. There will be a Meeting of Creditors (341 meeting) with the bankruptcy trustee. Afterward, you must take a second financial counseling course before the discharge can be entered. Once repayments (if any) are complete, you’ve taken your courses, your bankruptcy paperwork is filed, and the bankruptcy trustee and judge give a seal of approval, your discharge will be granted!

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 penalties for creditors trying to illegally collect 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 debt after bankruptcy

Bankruptcy only discharges debt incurred before the date you filed your bankruptcy petition. Any debt from after you filed 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 in most cases, you must wait a few years before you can file bankruptcy again

What type of collection activity does a bankruptcy discharge prohibit? 

With few exceptions, debt collectors are not allowed to call you, send you letters, or talk to you in person about the debt that was discharged in bankruptcy. Debt collectors for discharged accounts are not allowed to sue you for the debt discharged in bankruptcy, garnish your wages, or garnish your bank account. The debt is gone! 

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 zero-dollar 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 $0.00 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. 

What to Do If A Debt Collector Pursues After Discharge?

It’s possible for a notice with an order for bankruptcy discharge to get lost in the mail, and it’s possible a debt buyer won’t research the history of an account. Can a debt collector call? The courts recognize the difference between one reasonable phone call and relentless collection activity. Make sure you give a first-time caller a warning and follow these steps: 

Step One: If you have a bankruptcy attorney, tell the debt collector to contact your attorney. If you don’t have an attorney, 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 Two: Simply tell the debt collector you have an order of discharge from the bankruptcy court and give them the 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 Three: If the debt collector persists despite a warning, you can file court papers for a case against the creditor. It’s an adversary proceeding, and you’ll have to reopen your bankruptcy case. An attorney is recommended. The creditor must pay attorney fees for discharge violations, not you! Records show there were over 481,000 cases filed for creditor misconduct in 2019 for Chapter 7 cases, and over 280,000 for Chapter 13 cases. 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!

About the authors

The Upsolve Team
Upsolve is lucky to have an incredible team of finance and consumer rights professionals as contributing writers to help us keep our content up to date, informative, and helpful for everyone.

Attorney Andrea Wimmer
Andrea practiced exclusively as debtors’ counsel in consumer chapter 7 and 13 cases for more than 10 years before joining Upsolve, first as a contributing writer and editor and ultimately joining the team full time in August 2019. While in private practice, Andrea handled all ban... read more

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