Tips on Dealing With Creditors Following Bankruptcy
One of the most important things to remember before, during and after your bankruptcy is that your licensed insolvency trustee is the best advisor you could wish for.
Whenever you’re unsure, it’s always best to seek the advice of your trustee.
Dealing with creditors after your bankruptcy has finished is one aspect of your licensed insolvency trustee’s involvement, but it doesn’t end – or indeed start there.
Your licensed insolvency trustee, the stages of bankruptcy, and contact with your creditors
At times during your bankruptcy process, there will be a need to have a dialogue with your creditors.
Among many other things, licensed insolvency trustees are a mine of information during the bankruptcy journey.
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When a creditor contacts you, the best course of action is to seek advice from your trustee.
You can then use the information when talking with your creditor, or in some circumstances, the trustee will communicate directly with the creditor on your behalf.
Where there’s a need to communicate with a creditor in writing – or supply documentation to them – it’s essential to discuss that with your trustee.
They’ll always advise you in terms of what’s in your best interest.
What is a Stay of Proceedings?
In advance of filing for bankruptcy, it’s reasonable to be still receiving a high density of collection calls and other types of communication from and on behalf of your creditors.
Once you file for bankruptcy, an automatic stay of proceedings takes effect.
What that means for you is that all legal actions currently being pursued against you get stopped – that could be a writ of execution or a default judgement, for instance.
It doesn’t matter at that time how far the proceedings have gotten – as soon as the stay of proceedings kicks in, the action will stop.
Then, if any of your creditors wish to continue with legal action against you, they need to go before the bankruptcy court with a motion seeking permission to do so.
Generally, the court will rule based on whether the debt in question might outlast your bankruptcy process – such obligations might include matters arising from the family court, or cases against you which are connected with any type of fraud.
Other creditors, such as loan or credit card companies, won’t contest a stay of proceedings – because no exemption of any kind applies.
It’s handy to be aware – although it’s more unusual than not – mistakes can occur – on both your side and the side of your former creditors.
It certainly isn’t unheard of that a rogue creditor might contact you after your discharge either – but, it’s nearly always not for a sinister reason.
Next, we’re going to look at some instances when creditor contact might happen, why it happens, and how to deal with it when it does.
Rogue loan companies and attempts to intimidate you:
Unscrupulous lenders will occasionally attempt to bend the rules after a bankruptcy.
Especially if you’d taken out any payday loans, it pays to be on guard if you do receive any collection calls after the event.
While there have been recorded cases where such lenders tried to intimidate people into paying up anyway after bankruptcy – it’s essential to stand firm.
What your discharge means, and what it means when your trustee gets discharged:
The number one thing to remember if a rogue creditor calls you after you’ve filed is don’t pay anything.
That’s because you no longer have any legal responsibility to pay them.
The fact this occasionally occurs, however, presents an excellent opportunity to look more closely at how the discharge process works – for both you and your licensed insolvency trustee.
- During bankruptcy, the stay of proceedings prevents any of your creditors from taking legal steps to collect.
- Once you get discharged from bankruptcy, you’re absolved of any legal obligation to pay any debts that didn’t survive your bankruptcy (such as family court debts) – although the debts still exist at that point.
- When all of the administrative ends of your bankruptcy proceedings have been tied up, your trustee gets discharged. The case is then closed, and your debts are gone – for once and for all. It can take a few months for your insolvency trustee to get discharged finally.
You made a genuine mistake and forgot to list a creditor:
This is one of the reasons a creditor might contact you after bankruptcy.
It’s an easily made mistake and one that happens occasionally – especially when you have a long list of creditors.
If you forgot to list a specific creditor when you filed for bankruptcy, they would have zero inklings about events and may well continue to chase down the debt.
What happens when you didn’t list a creditor when filing for bankruptcy:
If your trustee is yet to get discharged, you can tell the creditor to get in contact, and they will get the same rate of return on the debt as your other creditors.
All that means is that everyone involved with your bankruptcy is listed on what’s called a Dividend Sheet.
The sheet displays precisely how much each creditor received when your bankruptcy finished – and in many cases, that will amount to nothing.
In other cases, your creditors might have received a very small percentage of what they were owed.
If that’s the case on the Dividend Sheet, the creditor you forgot to list will be entitled to the same.
When the amount to be clawed back is insignificant – as is the case with many bankruptcies – creditors often don’t even bother to collect.
Your creditor made a genuine mistake:
Recording errors occur in every area of business, and it’s not entirely unreasonable for one of your creditors to make a mistake.
The result of such an error will most likely be that you get a call from their collection department about the debt.
In some instances, the creditor may have enlisted the help of an outside collection agency – in which case, you could hear from them.
What to do when a creditor mistakenly contacts you after bankruptcy:
If this happens soon after you’ve been discharged, direct the caller to your trustee.
It may be the case that something got omitted.
If it’s a way down the line after your bankruptcy, your trustee may well have also been discharged and the file closed.
If so, you may need to forward relevant copies of documents to the creditor.
They are likely to ask to view the Final Statement of Receipts and Disbursements your trustee issued.
It’s a great idea to keep copies of relevant documents for some time after your bankruptcy.
It’s improbable any creditor will pursue a debt beyond that, but if they do – you’ll need to send them a registered letter and request they stop collection activities and take you to court.
If it gets that far, producing the Final Statement of Receipts and Disbursements will see the case dismissed and the creditor picking up the costs – including for your time in court.
Talk to your local licensed insolvency trustee and make the collection calls stop
The bankruptcy process – from filing to discharge – offers certain protections from creditors until your debts get eliminated, and you can move on.
Licensed Insolvency Trustees not only administrate the process but are your best resource along the way too.
At BankruptcyCanada, we’ve been putting people like you in touch with professionals who can help them for decades – give us a call on (877) 879-4770 (24/7) and find out how we can help you too.
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