One of the main reasons consumers file Chapter 7 bankruptcy is to stop creditor harassment, but it doesn't always work the way it is supposed to, and sometimes when it does, it may not the way you thought it would work. So what exactly are the laws about creditor harassment after chapter 7 and what can you do if a creditor is ignoring them?
Laws Prohibiting Creditor Harassment After Chapter 7
The first law that prevents creditor harassment after chapter 7 bankruptcy is 11 U.S.C. § 362, which is a federal law that automatically stays, or stops, the debt collection process after a chapter 7 bankruptcy petition is filed. This stay goes into effect automatically the moment that a petition is filed, and prohibits most creditors and debt collectors listed on the bankruptcy petition from attempting to collect on the debt in any way. This includes sending collection letters or new bills, calling, continuing to garnish the debtor's wages, filing a new lawsuit, or continuing the proceedings in a lawsuit that has already been filed. It may take creditors a while to get a notice of the bankruptcy filing, however, so some creditor harassment after chapter 7 can be expected to continue for a short time subsequent to the initiation of the case. Creditors should receive notice from the court and stop collection attempts within a few days of the chapter 7 bankruptcy petition being filed. Once a creditor receives notice of the chapter 7 filing, it is in violation of the federal stay if it continues to attempt to collect the debt in any way, without first getting permission from the bankruptcy court.
During the pendency of a chapter 7 bankruptcy, creditors who have secured claims (those who own a debt where property has been used as collateral), such as a mortgage, vehicle loan or rent to own agreement, may file a motion with the bankruptcy court asking for permission to foreclosure on or repossess the property securing the debt. The chapter 7 petition includes a schedule where debtors list all of their secured debt and indicate whether they intend to keep the property securing the debt and continuing paying on it or if they wish to surrender the property and have the debt discharged. If you choose to surrender the property, the creditor will ask for permission to proceed with foreclosure or repossession efforts. If the court grants the creditor's motion, that creditor is then exempt from the automatic stay insomuch as it may take any legal action necessary to take possession of the property securing the debt. Creditors granted this exemption may not call or write in an attempt to collect on the debt. They may only take the actions necessary to take possession of the property.
Once all schedules, notices, and information have been provided to the bankruptcy court, and the petition is approved, the court will issue a discharge order and close the bankruptcy case. After the discharge order is issued, a permanent injunction, under 11 U.S.C. § 524, goes into effect for all debts listed on the petition. Creditors and debt collectors are then forever barred from attempting to collect on the debt that was discharged and are also prohibited from reporting late or missed payments to the credit reporting bureaus. This does not mean that you do not still owe the debt or that the creditor is prohibited from taking payments on it. Therefore, creditor harassment after chapter 7 discharge may continue, by unscrupulous creditors and debt collectors who hope that you do not know the law, or do not know how to enforce it, and you will simply pay in order to stop the harassment.
Exemptions to Laws Prohibiting Creditor Harassment After Chapter 7
Specific actions of certain people or entities are exempt from the automatic stay that federal law provides to debtors in a chapter 7 bankruptcy. Creditor harassment after chapter 7 may continue, without there being any violation of bankruptcy law, in these instances. A few of the more common of these exempt actions include:
- Wage garnishments, tax refund interceptions, and other collection attempts, of domestic obligations, such as child support and alimony
- Attempts to collect taxes owed to a government entity, such as the Internal Revenue Service or a State's Department of Revenue
- Continuation of eviction proceedings where a judgment for possession of the property was obtained before the date of filing of the bankruptcy petition
- Actions to repossess property that is the subject of a lease which expired prior to the date of filing of the bankruptcy petition
Creditor harassment after chapter 7 discharge may continue without violation of the permanent injunction if the creditor owns a debt that is considered non-dischargeable under 11 U.S. Code § 523. The most common non-dischargeable debt includes debt:
- Owed to a government entity, such as income taxes, traffic tickets, or other fines
- For the payment of current and past due domestic support obligations
- Incurred for educational expenses (student loans) made, insured, or guaranteed by a
- Payable to a home owner's association
What You Can Do About Creditor Harassment After Chapter 7
If a creditor is harassing you shortly after you filed your chapter 7 petition with the Court, it may be that they have not yet received notice that you have filed for bankruptcy protection. In order to stop the harassment, let the creditor know that you have filed a chapter 7, give them your case number, and get the correct address for bankruptcy notices from them. Then check your petition to ensure that the creditor is listed and the address is correct. If they are not listed on your petition, you will need to amend it to include them, or the debt will not be discharged. If the address is simply incorrect, call the court and let them know and then follow any instructions they give you. If a correctly listed creditor continues to harass you after being given enough time to get notice, you may need to contact an attorney to help you file a claim against them in the bankruptcy court.
If a creditor is calling you to collect on a debt that has been discharged, ask for the correct name and address to mail bankruptcy notices to, then check your petition to ensure that the debt is listed with the correct information. If the debt is listed on the petition, mail the creditor a copy of your discharge order. If the debt is not listed, you may need to reopen the case and amend the petition to include it, as unlisted debt is not discharged.
If you are experiencing creditor harassment after chapter 7, contact our office at 1-800-219-3577, for a free, no obligation consultation.