Once your debts are discharged in your bankruptcy case and the case is closed, you would think that it is all over and you can start fresh. Most of the time, this is definitely true. However, once in a while, your creditors pretend they have never heard of the bankruptcy code and try to collect from you. So what do you do to protect yourself?
Under 11 U.S.C. §727, all your dischargeable unsecured debts that were incurred prior to the filing of your Chapter 7 bankruptcy case are discharged, and you are no longer personally liable for those debts. Creditors are prohibited from collecting those debts from you after your discharge. All collection activities are prohibited, including but not limited to: contacting you by phone, sending collection letters to you, suing you, or continuing a lawsuit against you. You can always pay for the discharged debt if you wish to, but you are under no obligation to do so, and creditors cannot force you to do so. If creditors have a valid lien against you, however, they can still enforce those liens if those liens were not avoided in your bankruptcy case. Examples of valid liens are mortgage or vehicle liens. Some of the debts that are not dischargeable, however, are debts such as alimony/child support, recent taxes owed, student loans, debts incurred fraudulently, and debts for personal injuries caused by the debtor when operating vehicles while intoxicated. These debts would still need to be paid by the debtor after the Chapter 7 bankruptcy discharge.
Under 11 U.S.C. §1328, you will receive a discharge of all your dischargeable unsecured debts once you successfully complete your Chapter 13 bankruptcy plan. Similar to a Chapter 7 bankruptcy, the discharge applies to all your unsecured debts that were incurred prior to filing your bankruptcy case. Since creditors receive a percentage of your Chapter 13 plan payments, the only creditors you receive a discharge from are the ones scheduled in your Chapter 13 bankruptcy petition. The creditors that you inadvertently failed to disclose did not receive notice of your bankruptcy case, and thus you may not receive a discharge from those undisclosed debts.
Once you receive a Chapter 7 or Chapter 13 bankruptcy discharge, if creditors continue their prohibited collection activity against you, you need to notify them that you have already received a discharge of the debt they are trying to collect on. If they still continue to harass you or try to collect from you, it is time to contact your bankruptcy attorney to have them put a stop to these actions. These creditors may be sanctioned by the court for violating the discharge order.
The Law Offices of Lin & Woos is a Bay Area and California consumer bankruptcy firm filing Chapter 7 and Chapter 13 cases for individuals in need. Visit us online to find Fremont bankruptcy lawyers or a Union City bankruptcy attorney committed to providing personal service for a reasonable fee.
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With the tough economic climate these days, there are over 1.5 million people expected to file for bankruptcy this year alone. For many people the decision to file for bankruptcy is a hard one. However, it may be the best course of action for individuals given their financial situation. Unfortunately creditors often reinforce the many negative perceptions about bankruptcy. People associate the term bankruptcy with failure or just giving up. This is far from the truth. Bankruptcy allows individuals that are financially burdened to take control of their debts and legally deal with their creditors. Many will emerge from bankruptcy with a fresh start and a second chance to live debt free.
Creditors want people to think that bankruptcy will ruin their life and destroy their chances of ever receiving credit again. This is a myth perpetuated by the debt collectors. Just because someone filed for bankruptcy does not mean that they will never be approved for credit again. There are many lenders that are willing to take a chance on a debtor as long as they are employed. Creditors understand that the individual will not be able to file again for eight years, and if the person filed Chapter 7 bankruptcy, they are most likely debt free. Many creditors view this as an opportunity.
The quickest way to rebuild credit after filing bankruptcy is to reestablish a good payment history as soon as possible. It is always a good idea to consult with your bankruptcy attorney to get post bankruptcy advice. There are many other resources available online or at the local bookstore that can be a valuable asset for the debtor that is interested in learning ways to manage their money better. One important lesson to learn is to be able to distinguish between wants and needs. Set a budget and stick with it. A good way to get credit quickly after bankruptcy is to get a secured credit card from a major bank. Many people start receiving these offers from banks within months after their bankruptcy discharge. These cards will require a security deposit in a bank account that will allow the individual to charge up to that amount. Having a monthly payment that is always paid on time is a quick way to build a solid payment history. Another loan that is easy to get is an auto loan. The debtor may have a higher interest rate along with a larger down payment, but this will help to build their credit history along with repair their credit scores.
Debtors must be careful not to be tempted into going out and spending recklessly just because their credit scores are improving and they are receiving more offers for credit in the mail. The same irresponsible financial mismanagement practices that caused the debtor to file bankruptcy previously might ensnare them again if they are not diligent. The debtor can maintain a decent standard of living while honoring their financial responsibilities. They must be frugal and watchful about incurring more debt than their budget can handle. Also, they should be careful not to apply for credit too frequently. A large number of inquiries on a credit report can actually lower credit scores and undermine all of the hard work of trying to rebuild them.
Life always teaches us lessons. Learn from your mistakes and do not repeat them. Living debt free is the reward.
The author started DebtFreeBankruptcyAttorney.Com which is a website that helps individuals with debt problems by putting them in touch with a local bankruptcy attorney that specializes in filing bankruptcy under Chapter 7 and Chapter 13 bankruptcy. Check our website for more answers to bankruptcy questions and ideas on how to have a debt free future.
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There are numerous articles posted online that describe cases where people appear to have been put in jail in some states for merely owing monetary debts. This can happen to debtors who either owe money to the court or to private parties. And this has happened in spite of the fact that debtor’s prisons were outlawed federally in 1833. Most of the states followed suit after 1833 and included clauses in their constitutions prohibiting imprisonment for owing money to someone.
In spite of these prohibitions debtor’s prisons seem to be making a comeback. There are states where it’s possible to put someone in jail for failure to pay a debt. I am surprised that lawyers in these states have not put together constitutional challenges to someone who was thrown in jail for such a monetary debt.
According to blog I found online people are languishing in Illinois jails, in Champagne and other counties, for owing unpaid traffic tickets. A law professor from Notre Dame Law School quoted in the article says that we do have “de-facto” debtor’s prisons because of this practice of jailing debtor’s for merely owing money in spite of constitutional prohibitions even if the money is owed to the state. According to this law professor this creates a situation where debtors are scrambling to come up with money by any means just to stay out of jail.
An article in the Saint Petersburg Times points out that it costs the jails $53 per day (in Florida) to incarcerate these people who often don’t owe much money. So the taxpayer pays for the jailing, the judge, and the whole judicial system that wastes time and money trying to collect from these destitute people. In Florida they have an ominous sounding “Collections Court” that handles these cases and about a third of Florida counties have these courts. Even in the counties without these courts people are still being jailed for owing money.
According to the Times article it costs the system $62,085 to bring in $80,450 in debt. Those languishing in jail for these unpaid tickets are certainly poor and often minority but anyone without means can get caught up in this travesty of justice. How is it still a possibility that you could go to jail for owing money? Were debtors prisons not outlawed in the 1800s? Didn’t Charles Dickens inform us 200 years ago about the foolishness of this practice?
The Times article points out that you can be jailed for violating a court order or for failing to make court ordered payments. So technically they are not being jailed for owing money but it amounts to the same thing. Jail time is usually given to people who owe spousal and child support but legal experts argue that it is all illegal.
Now there is more and more disturbing chatter on the internet about debtors being jailed for owing a purely private company money. There are horror stories emerging about arrests made and persons jailed for owing money to private parties. On such woman was arrested one day, handcuffed, put in a very cold police car, brought to jail and no one told her why for some time while the contents of her purse were unceremoniously dumped in a plastic bag. She spent a cold night in jail keeping her hands under her armpits for warmth until 16 hours later when she was informed that she missed a court hearing concerning some private debt.
In that case she had missed a court hearing but in Indiana a man faced jail for just failing to pay a purely private debt. His incarceration had nothing to do with violating a court order. According to an online article in the Minnesota StarTibune a lawyer challenged the constitutionality of a debtor being threatened with jail for owing a debt. The appellate judges agreed with the lawyer and he won the case because debtor’s prisons were made illegal in Indiana in the 1850s.
The article in the StarTribune points out that there is an inconsistency with who is locked up when, and for how much debt, and the article points out that all of these things vary from state to state and county to county. It also makes mention that no one knows how often this happens as no statistics are kept of these incidents. One man in Illinois was locked up by a judge “indefinitely” for owing $300 to a lumber yard.
Now it seems that the collection agents are influencing the legal system more and more to be more creditor friendly. Some would say that the collectors are subverting the legal system and using the threat of jail and jail time extract money from people who cannot afford to pay anything towards these privately held debts.
The good news is though that bankruptcy can remove most debts from your balance sheet. After a bankruptcy discharge you legally no longer owe the debts anymore so no creditor can try to collect on them or try to get you put in jail if you don’t. Your legal obligation to pay these debts is eliminated. With debt collectors gaining in power and money and influence this is a very good thing.
In California I know that the courts can threaten you with jail if you do not attend the court ordered “debtor’s exam”. This is where a creditor can ask you all sorts of personal questions about your assets and your financial situation. The courts cannot jail you if you do not pay the creditor in California but they threaten to jail you if you don’t show up for the court ordered exam.
I filed a case for a client the day before his debtor’s exam and he brought his bankruptcy case number to the debtor’s exam. The other attorney did not know what to do but the judge threw the whole case out right there and told her to go to bankruptcy court for any money. My client had nothing and the creditor had no reason to declare his debts non-dischargeable so that is the last we ever saw of the creditor. My client got his discharge without a problem. Bankruptcy is indeed a powerful mechanism to defeat over-zealous creditors.
You almost always don’t have to argue whether you owe a debt after bankruptcy and you don’t have to argue whether any punishment is constitutional.
I am a bankruptcy lawyer practicing bankruptcy law in San Diego California. Please visit my website at http://www.farquharlaw.com/.
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