Can Creditors Collect after the Discharge

14 Feb Can Creditors Collect after the Discharge

The bankruptcy discharge makes most debts forever unenforceable against the person filing bankruptcy.

The discharge makes permanent the protection that the debtor got at the beginning of the case from the automatic stay.

A creditor who tries to collect a discharged debt after bankruptcy breaks the law. Not a safe course of action for the creditor.

Who is affected

The bankruptcy court mails a copy of the discharge order to every entity on your list of creditors. Getting that notice into the hands of everyone is why it’s worthwhile listing every partyat a good mailing addresswho ever had a hand in collection.

Ideally, you have listed the original creditor and every subsequent collector, debt buyer, and attorney who has contacted you about each debt.

Then there is no excuse for creditors attempting later to collect a discharged debt from you.

Case law in many circuits holds that even a creditor who didn’t get notice of the filing of the case is discharged. Where I practice in California, that case is Beezley.

Debts that survive bankruptcy

Some kinds of debts always survive the discharge: recent taxes and spousal or child support are the most frequent examples.

Liens usually survive a bankruptcy discharge. The borrower’s personal liability is discharged, but the creditor’s rights in the collateral survive.

A creditor who tries to collect a debt discharged in a bankruptcy case risks penalties for ignoring a federal court injunction. Unfortunately, in this era when packages of uncollectable debts are bought and sold like baseball cards, most debtors encounter a situation years after the discharge when some new debt collector tries to compel payment on a discharged debt.

If a creditor tries to collect

Keep a copy of the bankruptcy schedules, which listed debts as of the filing of the case, and a copy the discharge order available to prove that the debt is uncollectable. It is the combination of showing that the debt was listed and that you got a discharge that together proves the debt is gone. Unfortunately, the discharge order doesn’t list the debts that are now unenforceable.

If the collector persists, your bankruptcy lawyer can help you get peace and perhaps damages from the violator.

San Francisco Bay Area Bankruptcy SpecialistCathy Moran helps individuals and small businesses in Silicon Valley with their bankruptcy issues . She can often be found on Google+ and on Consumer Ledger, where she shares information about consumer protection issues and personal finance.

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Cathy Moran, Esq.

I'm a certified specialist in bankruptcy law (California State Bar Board of Legal Specialization) practicing in the San Francisco Bay Area for more than 30 years. In addition to practicing bankruptcy law, I train new practitioners at Bankruptcy Mastery.

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