Creditor Strategies to Collect After Bankruptcy

Even if you are just about to file bankruptcy, or even if your debt already has been discharged, there still are creditors who will pursue claims as far as possible. No matter what, always make your finances a matter of protecting your family, interests, and conscience.

Many large companies actually have in-house collections, because they do no want to pay the fees associated with traditional collections. Such companies tend to be fairly responsive to bankruptcy warnings and even may offer a quick negotiation to eliminate your debt.

If your account has been listed with an external collector, on the other hand, it is likely that your debt has been increased dramatically by the costs and fees of collection. The collection agents want their money, period. If you file for bankruptcy, it usually will take one full week for your creditors to be notified, and then they must stop harassing you.

When told that someone will be filing bankruptcy, most collection agencies will act as though they do not care, but they do. Most collection agencies work off a script, and some even may lie to collect their money. You might hear that your debt is not dischargeable or that they have an attorney who will fight the listing of the debt. For the most part, this simply is a game of nerves.

Just because you receive a letter from a lawyer regarding a particular debt does not mean that the lawyer is involved personally. Usually, such letters come from a paralegal or secretary who works for the attorney, and unless it is a very large debt, most lawyers do not actually go to court. If a law office does secure judgment on your debt, that judgment is just as dischargeable after bankruptcy as it was before the judgment. Because so many people actually file bankruptcy for fear of being sued, this topic is addressed in another debthelp.com article.

Reaffirmation Agreements

In a reaffirmation agreement, you agree to pay-off an old debt that previously had been discharged in bankruptcy. Debtors have legal rights after bankruptcy to keep creditors from preying on old debts, so any reaffirmation of an old debt must be voluntary. Any creditor who pressures or coerces an agreement probably is violating bankruptcy law (section 524).

Some of the most common reaffirmation cases deal with car leases. People often need a car to make a living, and cars represent the second largest cash outlay we tend to make. When it comes time to return a leased car, an old debt can become entangled with issues like “excessive wear and tear”. In order to get a new lease, a car dealer may request payment under the old lease. To protect legal rights, this likely will be done under a reaffirmation.

At least one court looked at this issue and said that debtors voluntarily go to the car dealer for a new lease, so the reaffirmation agreement is valid. Seriously consider whether or not it is wise to continue doing business with a company that held a discharged debt, before you take action. It might be easy to improve relations and credit with a promise to repay some of the old debt, but this does not mean that it is either necessary or wise.

In some cases, however, a good long-term relationship with a creditor is crucial. What if you are dealing with a bank or credit union? Do not feel pressured to “voluntarily” agree in such circumstances. Rather, speak with a competent debt counselor or lawyer about your rights to reaffirmation with any lender with whom you continue to do business.

Conclusions

There are two very different strategies for collecting debt. Some creditors attempt collections from within, and other times creditors use collection agencies to harass and intimidate. Even after bankruptcy, you may be offered “deals”. In any case, once the protection of bankruptcy is there, the law is clear. Discharged debt is no longer debt at all. Accept the privileges you have gained, or speak with a counselor or lawyer about reaffirmation.