Bankruptcy’s Effects Upon Debt Collection
In 2016, more than 26,000 business owners and private individuals in New Jersey protected themselves against aggressive creditors by filing for bankruptcy. Once you’ve filed a bankruptcy petition, any effort to collect the debts listed on that petition are supposed to cease. If you’re being targeted by belligerent debt collectors, consulting with an experienced New Jersey bankruptcy lawyer may be the first step in getting these abusive creditors off your back.
The Vicious Cycle of Debt Collection
Unfortunately, it can be all too easy to get into the habit of using credit cards irresponsibly. There’s that vacation you want to take. There’s that special birthday you want to celebrate. So long as you have a job, you tell yourself, you’ll be able to whittle that debt down. What happens, though, if you get laid off from your job? Even when you are using your credit cards responsibly, what happens if you get hit by a medical emergency that isn’t covered by your health insurance?
Scenarios like this are very common.
The first time you miss a payment, you’re unlikely to receive a harassing phone call. If you miss more than two or three payments in a row, however, your lender may forward your account to the company’s in-house collection agency. At this point, the people charged with collecting on your account may be aggressive, but they are likely to remain civil. It’s when the original creditor gives up on reimbursement and assigns your debt to a third-party collector that things have the potential to get out of hand. Third-party bill collectors won’t be shy about using tactics that embarrass or humiliate, and these tactics sometimes go beyond the bounds of what’s legal.
As a consumer, you’re protected against deceptive and abusive bill collectors under a piece of federal legislation called the Fair Debt Collection Practices Act (FDCPA). If you’re being harassed in violation of the FDCPA, you have the right to bring civil action against your harasser.
How Bankruptcy Can Help
Once you file a bankruptcy petition, an injunction against creditor actions goes into effect that should protect you against most types of collection efforts. This stay only affects creditors that are listed on your bankruptcy petition, so it’s important that your petition is as complete and specific as you can make it. You will not have to communicate with these creditors; the bankruptcy court will inform them of the stay.
When you file for Chapter 7 bankruptcy, the automatic stay typically remains in effect for a short time, which is usually enough for the legal discharge of your debts in most instances. Similarly, when you file for Chapter 11 bankruptcy, creditors may not pursue judgments against you for a period of three to five years except in rare instances that are described in 11 U.S.C. § 362(b).
Creditors do have the right to petition the bankruptcy court for the removal of this injunction. Additionally, the collection of debts related to certain tax proceedings, child or spousal support and pension loans will not be affected by these stays.
In most cases, the completion of bankruptcy proceedings will wipe out your personal liability for the unsecured debt that was discharged. Under certain sets of circumstances, however, creditors may still be holding liens that stipulate their legal right to get paid from an asset that you own rather than from you as an individual.
If one of your creditors obtained a judgment lien against you before you filed your bankruptcy petition, that lien may remain in effect after the bankruptcy proceedings are through, and that creditor may have the legal right to pursue payment. You may be able to have a judgment lien removed if certain legal requirements are met. A lawyer who’s familiar with bankruptcy law can be a useful resource here.
For more information about the ways that bankruptcy may be able to protect you from creditor harassment, contact a bankruptcy attorney with the law firm of Neuner & Ventura in Marlton at (856) 596-2828.