Dealing with Debt Collectors – Q and A

Steven R. Neuner Esq.
January 2011

[Here are some basic answers to common questions, based on New Jersey law and certain federal statutes. These answers are necessarily not complete. Complexities can arise in different situations. Always seek qualified legal advice from an attorney licensed to practice in your state.].

Q: I have hired an attorney to help me deal with my debts but the debt collectors are still calling me or being abusive. Are they allowed to do this? What can I do about this?
Under federal law, persons collecting a “consumer” debt for someone else [“Debt collectors”] are not allowed to continue contacting you after they have been notified that you are represented by an attorney. If they do, you have certain rights, including the right to seek recovery of statutory damages, counsel fees, and in cases of serious violations, punitive damages. If you incur any actual expense or loss as a result of this behavior, damages can be recovered as well. This does not apply to persons collecting for themselves or for their employer. It also does not apply to debts that were not incurred for personal, family or household purposes. We recommend that you maintain a notebook or written log of all creditor contacts. You should list the date, time, telephone number calling you and the substance of anything that was said. You should indicate in your notes that whether or not you told them about your attorney.

No matter whether the above applies, when you first get these calls, you should ask for the full name of the person calling, who they are calling for, and where they can be reached. You should try to get a return fax number, e-mail address and mailing address. Calmly and politely tell them that you are represented by an attorney and that you know your rights under Federal Law. Do not misrepresent facts or make promises you cannot or will not keep. Again, getting legal advice about all your options is usually the best course of action.

Q: The debt collector was nasty and abusive. He/she refused to hang up and call my attorney. What should I do?
Fortunately this appears to be not terribly common but it does occur. If a debt collector is nasty or abusive, you do not have to speak to them, and you do not have to put up with this behavior. Be firm and polite, and do not be bullied. Hang up if you need to end the conversation. One strategy that often works is to record the conversation but tell the caller that you are recording. (Laws in many states prohibit recording a conversation without notice to the other party.) If you do not have recording equipment readily available, telling a person calling that you are recording anyway may stop them from continuing to harass you. Again, make a note of any of these conversations.

Q: The collectors are leaving messages for me. What should I do with these messages?
Save them. They are important evidence.

Q: I am being bothered by the creditor I owe money to, not a debt collector. Does this make a difference?
Yes, at least until a bankruptcy is filed. The federal law governing collection practices does not apply to creditors collecting their own debts.

Q: The debt was one I incurred in a business or for investment. Does this change things?
Yes and no. The federal Fair Debt Collection Practices Act does not apply to business or investment debts. But you are still entitled to be treated courteously and not abusively.

Q: Can creditors file suit to collect debts before a bankruptcy is filed?
Yes. If you are served with legal papers, whether by mail or by delivery to you or your home you should not ignore them. See a qualified attorney for advice right away.

Q: Can I represent myself in court?
Individuals can represent themselves in New Jersey courts. Corporations, Limited Liability Companies and partnerships need to be represented by an attorney. However, you should always seek legal advice whenever you are sued. Debt collection matters may be routine, or they may involve defenses that you will need professional assistance to understand.

Q: I filed a bankruptcy case, but the debt collectors/collection attorneys are still trying to collect from me. What can I do?
Once a bankruptcy case is filed, the automatic stay makes it illegal for any creditor, collector or collection attorney to continue to try to collect any debt while the bankruptcy is pending, until you receive a bankruptcy discharge, or until the court enters and order granting “Stay Relief” (i.e., permission for the creditor to continue to collect the debt from you). If the creditor or debt collector has knowledge of the bankruptcy or has been given notice of the bankruptcy, continued efforts to collect can result in the bankruptcy court imposing sanctions including counsel fees in your favor, actual damages, and punitive damages. You should document your contacts with the collector and see an attorney about the remedies available to you.

Q: I see. But I forgot to list a creditor in my bankruptcy. Does this make a difference?
When we represent people in bankruptcy, we are very careful to see that everyone who our client owes money to or who might claim money is owed are listed. If you did not list a creditor, or listed them with an incorrect address, they will probably not know about the bankruptcy. You need to make sure the creditor and any collector or attorney for them is given notice of the bankruptcy, preferably in writing. In this situation, you should have your attorney amend your schedules to list the creditor properly. Even if you did not list the creditor in bankruptcy, once you give them notice of the bankruptcy they have no valid excuse for continuing to collect from you. Under caselaw applicable in New Jersey, Pennsylvania, and Delaware, a debt may still be discharged in a Chapter 7 bankruptcy even if you did not list a creditor in your bankruptcy where the trustee files a “No Asset Report” and no money was paid out to creditors. Under these limited circumstances that discharge may still prevent a creditor from collecting from you. However, there are other important reasons why you should list everyone who might seek payment from you . You need to see an attorney to understand what these are. The best protection against this situation is to make sure that all creditors are listed in your bankruptcy.

Q: The debt being collected resulted from something I did or which happened after my bankruptcy was filed. Does this make a difference?
Usually.. In most instances and certainly where you filed for bankruptcy under Chapter 7, your discharge only covers the debts that existed at the time of your original filing. There are special rules for Chapter 13 cases. And some debts including most taxes and “domestic support” obligations such as alimony or child support are not discharged. Secured creditors who have rights to property you own as collateral will usually have the right to recover that property. However, the rules have limitations and exceptions. To understand how they apply to you consultation with a qualified bankruptcy attorney for further advice is essential.

Q: I have gotten a bankruptcy discharge. A debt collector is still trying to collect from me on debt that I owed when my bankruptcy was filed. Is this allowed?
If your debt was covered by the bankruptcy discharge, attempts to collect any debt discharged in bankruptcy, violators can be subject to penalties and sanctions. There are a variety of rules about what is discharged, some of which are outlined above. You need to consult with an attorney about your rights in this situation. There are certain exceptions that apply. A bankruptcy discharge will generally not affect the right of a mortgage holder or secured creditor(e.g., the holder of a car loan where the vehicle has not been surrendered) to collect from you. Always seek legal advice if you have questions about what can and cannot be collected from you after a discharge. Please note that you may have rights to prevent collection of debts even if you did not list them in the bankruptcy under certain circumstances. Seek legal advice about this.

Dealing with unpaid debts and debt collectors is always stressful. Some but not all debt collectors will use tactics and means that are illegal. In order to protect yourself, you need to know your rights. You should always take careful notes and keep careful documentation of any collection attempts. Above all, do not be bamboozled or pressured into paying debts that you believe you do not owe or that may have been discharged by a previous bankruptcy. Your bankruptcy attorney should be able to help you with these issues, or you should seek advice from an experienced and qualified attorney of your choosing.

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