Make Them Stop! How to Stop Creditor Harassment With Bankruptcy

Creditor harassment is the number two complaint to the Federal Trade Commission (only behind used car dealers). In 2010, over 140,000 complaints were received, which was a 15 percent increase from the number of complaints received in 2009.

Creditors are often relentless in their efforts to collect, sometimes even breaking the law to do so. Of the complaints made to stop creditor harassment, the top three were as follows:

• Continuous calls from creditors at all hours threatening job garnishments
• Lying about the status, character or amount of the debt, even if there are errors
• Failing to provide the individual with a letter, mandated by law, detailing their debt and their rights

The Fair Debt Collection Practices Act (FDCPA) was written to protect people from these kinds of abusive debt collection tactics. The FDCPA applies to debt collection companies and other third-party debt collectors hired by creditors to recover money owed to them.

In July 2011, a new agency was created to address FDCPA complaints. The Consumer Financial Protection Bureau (CFPB) will now have responsibility for administering the FDCPA and writing new rules. Both the FTC and CFPB will work to enforce it.

Complaints Under The Fair Debt Collection Practices Act

In its 2010 annual report to Congress, the FTC listed the various types of complaints it had received concerning debt collections.

Almost half of all complaints the FTC receives relate to creditor harassment. Violations range from nonstop calls, to calls made before 8:00am and after 9:00pm, to the use of obscene, profane or abusive language, to threatening violence if the debt is not paid.

Misrepresentation of debt made up another significant portion of violations reported to the FTC. Creditors either have the wrong person or the wrong amount. In some cases, creditors were attempting to collect on debts that had already been discharged in bankruptcy.

Aggressive debt collectors may not threaten people with negative consequences if they do not pay the debt. A creditor is not permitted to threaten an individual with dire consequences under the FDCPA; for instance, a creditor cannot threaten the individual with the loss of his or her job because of the unpaid debt.

Debt collectors sometimes fail to tell a person they are debt collectors, hoping the person will say something that the debt collector can use against them. Debt collectors must identify who they are and why they are calling.

Even when they are directed to do so, creditors do not always cease communication. The FDCPA allows debtors, in writing, to ask that all communication regarding the debt stop. Compliance is mandatory, but the FTC reports almost seven percent of complaints were due to violations of this requirement.

The complaints reflect only the number of people who took the time to make complaints. The problem may be much greater. The problem with complaints is that they may take time to get resolved. When individuals are being hounded 24/7, they sometimes are losing sleep and fearful of losing their jobs. They need a quick change. There is one way to ensure their activities cease immediately.

Bankruptcy Will Stop Collectors’ Calls

Many people will do almost anything to avoid filing a bankruptcy. They are frequently concerned about their life and credit after bankruptcy. Despite losing a job, having hours cut, suffering major medical setbacks or facing some other financial problem, people resist bankruptcy.

Many people often resort to paying one credit card with another credit card, in an effort to keep the wolf from the door. Often times, this makes their financial situation even worse. Recently, the Atlanta Journal Constitution reported that many consumers are paying their credit card bills instead of their home mortgage payments. Eventually, many are forced to file bankruptcy anyway. And this is never a bad thing.

A Fresh Start

The U.S. Bankruptcy Code was designed to provide individuals with a fresh start for their financial situation. Filing Chapter 7 means a discharge or wiping out of debts you do not want to keep. A Chapter 13 filing allows individuals to catch up payments on secured debts, like your home or car and still discharge a significant portion of your unsecured debts.

As for those non-stop phone calls from debt collectors and a mailbox full of debt collection notices, a bankruptcy can also bring you piece of mind. From the moment your attorney files your bankruptcy, all collection activity must stop. No more phone calls or letters for the duration of your case.

The Automatic Stay

When you file a bankruptcy, section 362 of the bankruptcy code immediately creates what is known as the “automatic stay.” In law, a “stay” is something that stops an activity. Here, in bankruptcy, a stay is put in place to stop creditor harassment.

The automatic stay means that creditors have to communicate with you via your bankruptcy attorney. This means you are spared the incessant collection activity while your finances are sorted out within your bankruptcy case.

Violation of the Automatic Stay

If a creditor willfully violates the automatic stay by continuing to harass you by phone, sending collection notices or something like debiting a checking account for a monthly payment, your bankruptcy attorney can file a motion for sanctions with the U.S. Bankruptcy Court.

This tends to get the attention of debt collection agencies rather quickly, as this provision allows money damages, attorneys’ fees, and if the violation is sufficiently egregious, punitive damages. Punitive damages are used by courts to punish violations.

Should You File A Bankruptcy?

Like most people, your finances are probably complex. Credit cards, loans, a mortgage, bank accounts, stocks and retirement accounts all mixed together. The decision to file bankruptcy is a serious and complex decision.

There are many factors to weigh, and none should be treated lightly. But if your finances have become unmanageable and you do not see any way out, a Georgia bankruptcy attorney can explain the opportunities available to you and help relieve your financial stress.