Regulations can protect debtors from creditors' collection efforts
When bankruptcy looms, many people have already had to deal with regular phone calls from creditors. Once debtors hire a bankruptcy attorney, they can refer such calls to a lawyer. However, there is protection available against intrusive contact with creditors even for those who can't afford an attorney.
According to a Federal Trade Commission guidebook on the Fair Debt Collection Practices Act (FDCPA), a debt collector is not allowed to contact people at inconvenient times, such as before 8 a.m or after 9 p.m., unless individuals give them permission to call at those times. In addition, collectors may not contact individuals at their workplace if they have been told orally or in writing that they are not allowed to call there.
Under the FDCPA, collection agencies and attorneys trying to collect a debt must also stop making phone calls to a debtor's residence if they have been told to stop. At that point, the collectors are required to contact the debtor in writing only. However, those rules do not apply to "original creditors" such as a credit card company, just the collectors hired by the original lender.
Some states, including Texas, Michigan and California, go beyond the federal requirement. Those states also require original creditors to stop phoning debtors once they have been informed to limit their contact to writing only.
As soon as a petition is filed in U.S. Bankruptcy Court, the rules change in favor of debtors. Filing bankruptcy places an automatic stay on collection efforts and lawsuits by creditors. The court notifies creditors listed on the petition within days of the filing. In cases when wage garnishment or repossession of property is in process, an attorney should inform the creditor immediately to stop such actions.
The National Association of Chapter 13 Trustees states on its website that when creditors who have been informed of a bankruptcy filing continue to attempt collection of a debt, they can be charged with court sanctions and attorney fees related to their actions.
There are some exceptions to an automatic stay. For instance, it cannot stop collection efforts to obtain payment for debts not covered by bankruptcy, such as back child support and alimony payments or student loans.
Once the bankruptcy court agrees to discharge the debts, no further actions - including creditor telephone calls - can be made against debtors. If the court denies the bankruptcy petition, the case is dismissed and collectors can resume their efforts to obtain payment.
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