Why do people file for bankruptcy? The thing that drives most people into bankruptcy is the aggressive debt collection activity that most debt collectors use. They call night and day. They send countless letters demanding payment. They threaten to sue. The bank demands foreclosure without working out a loan modification. The repo man is circling the house to take the car. It goes on and on.
For most people filing bankruptcy will stop the calls, the letters, or the foreclosure. After finishing a Chapter 7 case or a Chapter 13 repayment plan, the debtor should get a “discharge” and then be able to get that “fresh start” in life that the Bankruptcy Code promises.
The trend today, however, is that debt collectors will still pursue a debtor after the bankruptcy case discharges the debt anyway. This is violation of the Fair Debt Collection Practices Act (“FDCPA”) that prohibits abuse, harassment, false or misleading statements and unfair or deceptive actions. Some jurisdictions hold that the sole remedy for a violation is to return to bankruptcy court and seek sanctions.
People who file bankruptcy need to be aware that debts that have been discharged should not be paid and they need to call their bankruptcy attorneys right away so the attorney can counsel them on how to best respond to these aggressive tactics.