The discharge order from the Bankruptcy Court creates a permanent injunction against the collection of all of your discharged debts. This injunction applies to the original creditor, a subsequent debt purchaser, all third party debt collectors, and any collection attorney. The discharge injunction comes straight from a federal bankruptcy court judge and is enforced through the court’s contempt power. Violators can be sanctioned, fined, ordered to pay attorney fees and damages, and even jailed!
Even faced with the serious penalties for violating the discharge injunction, creditors still sometimes call after bankruptcy. The truth is that when a collector calls, it is usually ignorant of your bankruptcy case. The first thing to do is to educate the collector. Inform the collector of your bankruptcy case number, chapter type (7, 11 or 13), when the case was filed, the name/location of the bankruptcy court, and the name and number of your attorney. Simply providing this information will stop future collection action in 75% of the cases. If you want to improve this effectiveness, fax or mail the collector a copy of your bankruptcy discharge order and schedules evidencing that the debt was included in your bankruptcy. Keep a fax confirmation page or registered mail receipt. If the collector calls again, you have documented proof that the collector knows about your bankruptcy case.
In those rare cases that a creditor or collector has actual knowledge of your bankruptcy case and continues to violate the court’s injunction, it is time to call your attorney. If you are contacted by a third party collector after bankruptcy, it is likely because your debt was sold. Buying and selling debts is big business, and discharged debts are often bundled along with thousands of other debts and sold for pennies on the dollar. That is not an excuse for the collector, especially after you have informed it of your bankruptcy discharge. The bankruptcy court has little sympathy for a creditor or collector that ignores its order.
If your discharged debt was sold, it may also mean that the collector has wrongfully updated your credit report. If the collection agency has listed itself on your credit report after your bankruptcy case was filed, then it has violated the federal law. A letter to the collection agency is usually enough to remove the listing from your credit report. Any collection action taken after your bankruptcy case was filed is expressly prohibited by the Bankruptcy Code. If the collection agency refuses to remove the entry from your credit report, call your bankruptcy attorney.
Most collection calls after bankruptcy are made from ignorance. That does not excuse the collector’s actions, but it does explain why it happens. Informing the collector is the first step. If collection calls continue, document the calls and contact your attorney.