Bankruptcy, The Automatic Stay, and Student Loan Debt Collector’s Telephone Calls–Which One Doesn’t Belong?

22 Dec Bankruptcy, The Automatic Stay, and Student Loan Debt Collector’s Telephone Calls–Which One Doesn’t Belong?

When a person files for bankruptcy protection, whether the petition is filed under Chapter 7 or Chapter 13, the U.S. Bankruptcy Code imposes an automatic stay against the collection of all debts. That stay applies to all creditors and all debt collectors. There are small exceptions, for example–for ongoing domestic support collection (that means child or spousal support that you have to currently pay to someone or to the state on behalf of someone).  The exceptions do not include student loan collections.  There is no exception for student loan debt collectors. Let me repeat that again, there is no exception to the stay against collection for student loan debt collectors.

Some student loan debt collectors will either lie to you and tell you that they can continue to collect, or perhaps they are just ignorant of the law. Perhaps the debt collector is willfully ignorant of the law. This past week, one of my clients complained of a debt collector continuing to call. Several threatening messages were left. The debt collection message used the threat of the U.S. Government to enforce the debt, even though it was now being collected by a private debt collector.

When the client picked up the phone, the debt collector refused to listen when the clients asked her/him (it was several representatives) to call their attorney rather than continue to call the client. The client tried to give the debt collector their bankruptcy case number. The debt collector refused to listen and continued to call. When I called the debt collector and advised that my clients were in bankruptcy and the calls were to stop immediately, the representative started arguing with me about whether or not the collection could continue. My clients and I are planning to file an adversary proceeding (a lawsuit) for the violations of the automatic stay and the best way to educate that debt collector is to have the bankruptcy court judge explain to them just how much money their behavior is going to cost them in the form of a damages award to my client!

Stay tuned for the outcome!!

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I'm a consumer protection lawyer in Oregon, working with people in Klamath; Lake; Jackson; Josephine; Curry; and Deschutes County. I speak regularly on bankruptcy and consumer protection issues nationwide.
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