When you receive a bankruptcy discharge, it releases you from personal liability for certain specific debts. A discharge injunction is a permanent order that prevents creditors from collecting on those and other pre-petition debts. This includes letters, telephone calls and other means of contact. When a creditor violates the discharge injunction, they can face serious consequences. The idea behind this is that bankruptcy allows debtors to either start fresh or catch up on their debts without losing their assets; allowing creditors to try to collect debt after a discharge goes against that policy. Read on for more information from a bankruptcy lawyer in Montgomery County, TX.
Prohibited Actions by Creditors
Once you’ve received your discharge, creditors are no longer allowed to contact you in an attempt to collect on your debts. This broad prohibition covers a number of actions. For example, creditors cannot try to sell the debt to a collection agency. They are not allowed to use phone calls, collection letters or public announcements of default in order to get in contact with the debtor. They cannot refuse to modify loans unless the debtor reaffirms mortgages or other loans, and they cannot move to perfect a lien over discharged debt.
Creditors actually have a legal duty to prevent violations, which, on a practical level, means they often form internal procedures to make sure they’re not contacting a debtor whose debt has been discharged.
Consequences of Violation
11 U.S.C. § 105 of the Bankruptcy Code allows bankruptcy courts to take actions against creditors who violate the code. This can include actual damages, attorney’s fees and costs as well as occasional punitive and emotional distress damages. The most common punishment to overeager creditors is civil contempt, which is usually payable by a fine.
Trying to collect on a discharged debt through any of those prohibited actions may also violate the Fair Debt Collection Practices Act and other state and federal consumer protection laws.
Of course, a debtor can voluntarily pay a discharged debt if they like, but the creditors are not entitled to collect it themselves. We see this most often if the debt would affect the debtor’s standing in the community, such as loans from family or unpaid medical debt to a local practice.
How to Proceed
If you believe a creditor is illegally harassing you to collect on your discharged debt, you have a few options. First, you should consider retaining a bankruptcy lawyer in Montgomery County, TX. Second, you or your attorney will file a motion with the bankruptcy court to reexamine the case. If the creditor is found to be illegally harassing a discharged debtor, they will be sanctioned.
You should be aware that discharges can occasionally be revoked. This usually happens when the discharge has been obtained fraudulently, or when there are errors and missing documentation. It’s important that you or the lawyer you hire goes through each piece of paperwork with a fine-tooth comb.
If you are looking for a bankruptcy lawyer in Montgomery County, TX, contact James R. Jones, Attorney at Law for a consultation today.