Can Creditors Attempt to Get Money After a Discharge?

By Tom Streissguth

When you file a petition for bankruptcy, you are asking a federal court for protection from creditors and time to work out your financial difficulties. In a Chapter 7 case, the court authorizes a trustee to seize your assets and sell them in order to repay creditors. In a Chapter 13, the trustee sets up a repayment plan, taking into consideration your assets as well as your income. Unless the case is dismissed, both kinds of bankruptcy conclude with a cancellation of debts you owe to some — but not all — of your creditors.

Automatic Stay

When the court accepts your petition for bankruptcy, it will issue an automatic stay. This is a restraining order that bars your creditors from any collection actions, halts any ongoing civil lawsuits, and prevents any new lawsuits as long as the bankruptcy case remains open. The automatic stay applies to all creditors, whether the debts they hold are secured by property or not, and whether or not the law allows that debt to be discharged at the end of the case.

Discharge

A bankruptcy discharge means that the court has cancelled a debt. The creditor may make no further effort to collect the debt, either by communicating directly with you or by filing a lawsuit. If a lawsuit is in progress when the bankruptcy petition is filed, and the debt is dischargeable by federal law, then the discharge in effect dismisses the lawsuit. The creditor has no recourse except to file a motion with the court to reopen the case and petition for reinstatement of the debt.

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Creditor Actions

If a creditor attempts to collect a discharged debt, the debtor may file a motion to reopen the case and have the discharge confirmed by the bankruptcy court. The debtor may also bring a claim for damages under federal bankruptcy laws, the Fair Debt Collection Practices Act, or the Fair Credit Reporting Act. This situation often arises when an original creditor has sold the debt, and the right to collect it, to a second or third party, who may be unaware of the bankruptcy if the debtor only lists the original creditor on the petition.

Negligence

If a debtor neglected to list a creditor on the bankruptcy petition, the automatic stay will not apply to that creditor. The bankruptcy court uses the bankruptcy petition to notify creditors, and does no investigation of its own to find the petitioner's debts. A creditor not listed on the petition may file a motion to add the debt and make a claim on the debtor's assets. Willful negligence on the part of the debtor may result in fines and penalties, and dismissal of the case. If the case is dismissed, the court will lift the automatic stay and reinstate all debts, both secured and unsecured.

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Schedule F Bankruptcy Discharge

References

Related articles

Can I Be Sued After Chapter 7?

If your debts have become unmanageable, you have the option to file for bankruptcy protection. Under Chapter 7 of the federal bankruptcy code, you must submit a petition in bankruptcy court. You must notify the court of creditors to whom you owe money, and list your assets on the petition. A trustee takes control of your assets, which can be liquidated (sold) to pay secured debts. During this process, you are temporarily protected from creditor lawsuits.

Define Bankruptcy Terminated

If you file for bankruptcy protection from creditors, a federal court gains jurisdiction over your assets, debts and financial affairs. The court has the authority to eliminate dischargeable debts, liquidate your assets or set up a repayment schedule (as in a Chapter 13 bankruptcy filing). However, the court also has the authority to dismiss or terminate the case, either on your motion or on its own initiative.

Is It Fraud if You Are in Bankruptcy and You Just Got Approved for a Credit Card?

If your debts are out of control and you can't meet your monthly payments, bankruptcy becomes a viable option. A bankruptcy court will stay any collections or lawsuits by your creditors; a court-appointed trustee will manage your financial affairs until the court discharges the debts. Credit card debt is a prime culprit in bankruptcies, but simply being approved for a new card does not rise to the level of fraud.

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