By Jay S. Fleischman, Esq.

When I was a kid I used to play a game called “Red Light, Green Light, 1-2-3″. Someone would cover their eyes and everyone would begin to approach. Then, when the person called out, “Red Light, Green Light, 1-2-3″ and turned around, everyone would stop. The people who didn’t stop in time were called out, and lost the game.

Just like the bankruptcy laws!

See, there’s a thing called the “automatic stay” that exists in bankruptcy. You can think of it just like a giant, grown-up game of “Red Light, Green Light, 1-2-3.” The minute your bankruptcy case hits the courthouse door (or, more likely, the minute the computer system receives it) all creditors must stop taking any action of any sort against you. And if you’ve filed a Chapter 13 case, the creditors cannot even take action against any co-debtor.

For you, it means the phone calls and letters stop. Lawsuits stop. Foreclosures stop. You name it, it stops. Heck, the creditors can’t even send you a birthday card once your case is filed.

Pretty powerful stuff, I think.

There are some limitations to the automatic stay depending on your case, and creditors can ask the court for permission to be excused from the limitations imposed by it. But for the most part, it’s absolute and straight-forward.

If a creditor or bill collector contacts you during your bankruptcy case, you have the right to sue and recover not only money damages but also legal fees. That’s right, the offending creditor can be forced to pay you and your lawyer when they violate the law.

In spite of this, I see creditors violate the automatic stay on a regular basis. Why? Because creditors don’t think you’re smart enough to call your lawyer. And they don’t think your lawyer is smart enough to do anything about it.

But you know better than that. You won’t let them get away with it. And neither do I.

By Jay S. Fleischman, Esq.

When you owe money to a creditor and don’t pay, that creditor may decide to sell your loan to some other company. It happens all the time, and it’s big business. Companies sell off thousands of debts to these other companies. That’s why your Visa card may be listed as something completely different.

Some debt buyers buy loans that have been discharged in bankruptcy in the hopes that they can wring some money out of them. Make no mistake - these companies are buying discharged debt on purpose, not because they have made a mistake. They pay pennies on the dollar and have turned it into a profitable business model.The debt buyer may send collection letters or make a few phone calls, but these companies know this is a risky tactic - they could call someone who knows their rights and get sued!

The more likely scenario is that the debt buyer will just report it to the credit bureaus and do nothing. They are playing the odds that you apply for a mortgage or other credit and are forced to pay the debt in order to clean your credit report and qualify for attractive financing. They’re willing to play this waiting game because they are paying so little to buy the discharged debt.

These actions may violate the bankruptcy discharge, the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, or your state laws. Don’t let the creditors steamroll over your rights - take action immediately.

By Jay S. Fleischman, Esq.

The Fair Debt Collection Practices Act governs conduct by third-party debt collectors; in other words, creditors are not covered by the FDCPA and cannot be held liable under this particular set of federal laws for harassing debtors.

At least one court, however, has turned this on its head and held a creditor liable for misleading a consumer in connection with the collection of a debt for a time share.

The U.S. Court of Appeals for the Seventh Circuit in the case of Catencamp v. Cendant Timeshare Resort Group - Consumer Finance, Inc. found the creditor liable under the FDCPA.

The court used a part of the FDCPA that actually reclassifies creditors as “debt collector” when that creditor, “in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts.”

In this case, Mr. Catencamp bought a time share but fell behind in his payments to Cendant Timeshare Resort Group. Cendant, in attempting to collect from Mr. Catencamp, sent some threatening letters. The problem was that Cendant didn’t identify itself clearly as the sender of the letters, but rather sent the letters under the name of a third party
debt collector, Resort Financial Services. In small print, the letter stated that Resort Financial Services was a division of CTRG - Consumer Finance.

The Seventh Circuit, realizing that this half-hearted attempt at honesty was not enough, held that Cendant, in deceiving its customers about the source of a debt collection letter may be liable under the FDCPA just like third party debt collectors.

You can read the entire opinion in PDF format by clicking on this link.

By Jay S. Fleischman, Esq.

The U.S. Bankruptcy Code exists to give people relief from their debts, and from bill collectors who will stop at nothing. Whether it’s Chapter 7 bankruptcy or Chapter 13 bankruptcy, the law provides for many debts to be discharged so you can get a fresh financial start.

Unfortunately, many creditors, collection agencies, and debt purchasing companies will do anything possible to continue collecting debts that have been discharged in bankruptcy.

It should be simple enough for the creditors to understand - when a debt is discharged, nobody can try to collect it from you. Period. End of argument.
The problem is that creditors, collectors and debt buyers routinely try to collect on debts that have been discharged in bankruptcy. They do this because they are betting that you will be too scared to do anything about it, and that you’ll pay the debt. Creditors don’t believe the laws apply to them, so they do anything they can to make you pay - send you letters, make phone calls, sell the debt to other companies, or merely sit on your credit report until you need it most. It doesn’t matter how long it takes because the creditors know they can recapture a significant amount of money from consumers like you every year.

It’s important to realize that you have remedies, and that you can fight back against the illegal scare tactics of the creditors.

For example, it is not unheard of for a consumer to receive a collection from a creditor years, even decades after a bankruptcy case. The original creditor has probably sold the debt a number of times, and by now it’s so old it couldn’t be collected even if a bankruptcy hadn’t been filed. Yet there it is, a collection letter sitting in your mailbox.

What do you do? You take action!

The U.S. Bankruptcy Code provides for the winning party to force the losing party to pay not only damages, but also legal fees. That means if you have been taken advantage of by the illegal tactics of bill collectors, creditors or debt buyers then most lawyers will not charge you any up-front fee.

By Jay S. Fleischman, Esq.

The nice thing about bankruptcy court is that there’s no filing fee if you’re a debtor and need to start a lawsuit against a creditor. That stands in stark contrast to the rest of the judicial system, where a filing fee is required to get in the door of the courthouse. In the U.S. District Court, for example, cost of filing a new case is a whopping $350!

As an added bonus the cost to serve a defendant in a lawsuit brought in bankruptcy court is significantly lower than in other courts. In fact, the most it will cost you to serve a defendant is the cost of a certified mail, return receipt envelope. Sure, that can cost a few bucks - but if you compare that with the costs of a process server you can easily save hundreds of dollars on service alone.