The goal of individuals who file bankruptcy is for it to be over as quickly as possible. In fact, most attorneys who file Consumer Bankruptcies (Chapter 7 and Chapter 13) want to get you case in and out the door as quickly as possible. Once the case is filed and the meeting of creditors has occurred the case is over and it is time to move on to the next case.
Both Consumers and Bankruptcy Attorneys need to know that there is more to a case than filing the petition and going to the 341 Meeting. You need to talk to your attorney what he or she will be doing after discharge. Despite debt being lawfully discharged and the Bankruptcy Judge having issued an order that you are not responsible to make payments– that does not mean the debt is out of your life. The debt buying industry has developed a system to buy and sell discharged bankruptcy debt. This type of debt has been nicknamed “Zombie Debt” because it is almost impossible to kill and makes its appearance at the worst possible time.
At this point in the article the logical response would be disbelief. Let me share this anecdote:
Clients filed a Chapter 7 bankruptcy and were discharged in 2006. Long after the bankruptcy case was closed the Clients were attempting to purchase a used car. The finance manager at the lot had sent the deal to several lenders but none would finance the purchase. The bankruptcy filing was not a problem but the $432.85 owed for a credit card debt was a deal breaker. The clients knew that this was a debt included in their Chapter 7 Case Clients then called me, their bankruptcy attorney, and wanted to skin me alive. They had filed Chapter 7 and I had not taken care of this debt. They were standing on a car lot being denied credit. They were embarrassed, frustrated, angry that this was happening. After getting over feeling about an inch tall I looked at the petition and found the debt had been listed and that the Bankruptcy Notice had been send to the credit card company not once, not twice but on three separate occasions. It took about a week but finally after the discharge notice was sent to the finance company and a deal was struck.
This scenario was a turning point in my career. I had done everything I knew to do help my clients but their problems were not fixed– problems they had paid me hard earned money to resolve. This was my introduction to Zombie Debt. Since the Fall of 2007, I have learned that banks, finance companies, debt collectors and Wall Street Bankers make temendous profits by participating in the market of buying, selling and collecting upon Zombie Debt.
In above anecdote, the debt collector attempted to recover money by leaving discharged debt on consumer’s credit report. This practice was discussed in an article by Liz Pulliam Weston of MSNBC. It is not an honest mistake or an oversight committed by a clerk making data entry. This is an intentional and deliberate attempt to collect debts which violates the law. Leaving debt on a credit report is a soft collection attempt but there are times when debt collectors dip into their bag of abusive tactics by making calls to the consumer, their family or employer. See “How a Debt Collector May Communicate with You” on how to address this behavior.
Although Illegal, Zombie Debt collection is very lucrative for debt collectors. It can be purchased for pennies on the dollar and then the collector makes demand for the entire amount. In addition the debt collector is shielded from the consumer as the guys at the car lot, the furniture store or the mortgage company are the ones delivering the news of credit denial. The worst part is that it is successful because there are not enough consumers who know that they have legal rights to stop after bankruptcy debt collection.
Without doubt, this behavior violates the United States Bankruptcy Code, the Fair Debt Collection Practices Act (FDCPA), the Fair Credit Reporting Act (FCRA), and the Kentucky Consumer Protection Act (UDAP). All of these laws are in existence to protect people who have filed bankruptcy from being subjected to abuse and harassment due to discharged debt.
In order to best protect consumers from after bankruptcy discharge debt collection it is necessary to start planning at the very first meeting with clients. Ensuring these protections are in place provides you the consumer great peace of mind. When hiring a bankruptcy attorney you should ask, “What are you going to do to protect me after discharge?” At a minimum you should expect your attorney to pull a copy of your credit report from the three credit reporting agencies, (Equifax, Experian & Trans Union).
Kentucky Consumer Law Group is prepared to assist you with all post-discharge bankruptcy problems. If you have filed bankruptcy, received your discharge, had your case closed and have not had a check-up of your credit history Let Me Know! We will be more than happy to schedule a time to meet, run your credit reports and see if your former creditors are following the law. It takes about 45 minutes and can give you peace of mind to know that you are truly back in control of your financial health.
On the other hand, if you have received a bankruptcy discharge and have been denied credit or have been receiving collection calls regarding an account in your case we can help you there also. Collecting debts after Discharge is behavior that is illegal and needs to be STOPPED immediately.
The Kentucky Consumer Law Group is a full service consumer protection firm that assists consumers when their legal rights have been violated. Contact us so we can discuss your legal options and jab a wooden stake into the heart of “Zombie Debt.”