In the past year or so I have seen something I hadn’t seen before. More and more clients are continuing to get notices and collection demands from medical bill collectors, even after they filed bankruptcy and even after they received a discharge.
Perhaps they do not realize the penalties that can flow from this kind of behavior.
Once a bankruptcy is filed, the automatic stay goes into effect. Any creditor or bill collector who becomes aware that the debtor is in bankruptcy is presumed to have “wilfully” violated the automatic stay by continuing efforts to collect. The vast majority of creditors and collectors know this, and obey the law. Those who persist with calls or other collection efforts face a possible motion in the bankruptcy court, seeking damages, payment of the debtor’s attorneys fees, and possibly punitive damages. Usually a simple “cease and desist” letter is sufficient to stop these efforts in their tracks.
But we have seen cases where the notices and calls continue. This should not be tolerated. Bankruptcy protection is a right by federal law.
The authomatic stay ends when the person in bankruptcy receives a discharge. The discharge makes the protections of the automatic stay permanent for most debts. (however, it does not protect against enforcement of mortgages or liens, most taxes or domestic support obligations, student loans and other non-dischargeable debts).
Even here, we have seen collectors continuing to pursue collection. When this happens, post-discharge, the remedy is legal action to hold the creditor in contempt.
In New Jersey, Delaware and Pennsylvania, the disharge protects debtors against collection even if they forgot to list the particular creditor, so long as there was no money paid out to creditors in the bankruptcy. (We always try hard to make sure everyone who is owed, or who might claim to be owed money, is listed)
This situation needs monitoring and appropriate action. Perhaps too many people have not called the offenders to account….