Common Mistakes Made by Bankruptcy Filers and Their Attorneys - #5

5. Ignoring Creditor Collection Attempts after Filing and Discharge.

There are a number of mistakes that debtors and their bankruptcy attorneys make that often cause  problems after discharge or after their chapter 13 is confirmed. These mistakes often make it difficult to enforce the discharge or the automatic stay and can cause the debtor to suffer a serious financial loss.

It’s human nature to avoid embarrassment and conflict, if at all possible. So, it is not understandable that Debtors would ignore calls and letters from creditors after filing bankruptcy. They know the debt is no longer collectible, so they throw away the collection and letters and ignore the calls that keep on coming after filing and even, sometimes, after a discharge is received. This, however, is a mistake.

Some creditors intentionally ignore a bankruptcy notice hoping that the debtor can still be coerced to pay. Whether it is to buy peace, ease feelings of guilt, or believing it will help improve their credit, debtors will often pay discharged debt even though they have no obligation to do so. The problem with ignoring these illegal contacts after bankruptcy is that the creditors will just continue to harass the debtor with calls, letters, by illegally pulling their credit reports, and they may even report the debt as active and collectible to the credit bureaus.

These acts may prevent a debtor’s credit score from properly rebounding after filing bankruptcy and threaten the fresh start they were expecting. What all debtors should do is keep every letter or email received from creditors, document each phone call carefully and report these contacts to their attorneys.

There are various laws that protect bankruptcy filers from these types of illegal contacts, but they can only be successfully prosecuted if there is evidence to show the court and jury. The actual letters, telephone records and documentation of damages are all needed to prevail in bankruptcy court, in state courts, or the federal district courts.  But nothing will happen unless an attorney who handles these type claims is retained and he has the proof necessary to prevail.

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Mortgage Lenders and Servicers Out of Control?

Mortgage Contracts Allow Creditors to Monitor Credit

Today I reviewed a husband and wife’s credit reports and was shocked to see what their mortgage servicer was doing to them. Over five years ago disaster struck this middle-aged couple, an illness and loss of employment forced them to file bankruptcy. They couldn’t afford their house payments so they surrendered their home in the bankruptcy, moved out, the debt was discharged, so they waited patiently for the lender to foreclose. The property was soon posted for foreclosure but for some unknown reason the foreclosure didn’t go through and hasn’t to this day.

     

Once the debt was discharged the lender no longer had a right to monitor or review the consumer's credit reports since there was no longer a debtor-creditor relationship. About a year later the mortgage servicer contacted the couple several times trying to get them to apply for a modification, do a short sale or give them a deed in lieu of foreclosure. The couple cooperated at first but when a short sale was offered to them it was rejected. The lender knew the couple was not qualified for a modification since they had vacated the property and the debt had been discharged. After the rejection the couple notified the lender in writing that they were fed up and would no longer participate in a short sale or deed in lieu of foreclosure and told them not to contact them in any manner in the future. The letter worked for a couple years and then suddenly the letters, statements, and phone calls began again.

  

When the couple came to us to see what could be done to stop the harassment we pulled their credit reports and were aghast to find out that in 2012 and 2013 the mortgage servicer had pulled their credit reports over 39 times without their consent and without a permissible purpose! It’s hard to believe that some of our leading financial institutions would be a party to such blatant invasions of privacy, but we see it far too often, not only with this servicer but with many others as well. Since the debt had been discharged and was uncollectible, the only conclusions we can draw are that the mortgage servicer doesn’t have the ability to control its automatic collection programs, it has no respect for their customer’s right to privacy, or both. Fortunately, there is a remedy for this flagrant violation of the law, the Fair Credit Reporting Act (FCRA).

 

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