When a creditor does not properly cancel out an account that is listed in a bankruptcy discharge, filers who have received a discharge of debt may receive collection letters post bankruptcy. If you find yourself receiving collection letters post bankruptcy, remember that this is common and easily addressed.
Sometimes accounts that you failed to pay prior to filing or during the filing process (before you received your bankruptcy discharge) will result in a “write off” or “charge off” of the balance. When this occurs, the debt doesn’t disappear. It simply enters the nebulous arena of collections.
Most banks/lenders will have one specific collection agency taking over bad debts/unpaid balances that the bank “writes off.” When the account is assigned to collections after non-payment, most collection departments will automatically send a letter demanding payment (such as the one you received). The entity holding the debt can sue you for the balance, but when you file for bankruptcy and the debt holder is notified that you filed on the debt, they lose the right to sue.
Sometimes the outstanding debt is actually purchased by a third party debt collection company. This type of company will pay pennies on the dollar for the debt. Their goal is to obtain the debt at a discounted rate and then collect some or all of the outstanding balance. After purchasing the debt, they have the right to collect on the full amount. If this happens, the options are few: you can pay the full balance, you can settle the debt by paying a portion in exchange for the debt collection agency writing off the remaining balance or you can declare bankruptcy and receive a discharge of the debt.
This type of debt collection company will sometimes end up sending collection letters post bankruptcy. They sometimes don’t end up with the correct notification of bankruptcy that would prevent the continued collection of the debt. After filing for bankruptcy (and included the debt in the creditor list) filers would be clear of the debt and simply need to property notify the collection agency of their bankruptcy filing and receipt of discharge.
Contact the collection agency directly. Provide them with your bankruptcy case number, the date you filed for bankruptcy, the date you received your discharge and, if possible, proof that the debt in question was included in your bankruptcy filing. Doing so should resolve the matter. If the collection company or other agency attempting to collect a debt included in your bankruptcy discharge does not accept the evidence you provide, you have a case against them, as they would be in violation of bankruptcy code.
For more information on how to handle creditors collecting post bankruptcy in violation of the California bankruptcy, or what to do if you are receiving collection letters post bankruptcy, contact the southern California bankruptcy experts at Westgate Law.