Bankruptcy law requires that once you file the case all collection activity must come to a stop. The court notifies all your creditors of your filing usually within a few days of the date you filed the case. That means that once the creditors get notice of the filing they may not send you any bills in the mail, call you on the phone or file a law suit to collect the amount owed. If they ignore the law, they can be subject to both compensatory and punitive damages.
In a case in New York, the Bankruptcy Court ordered a bank to pay the debtor $15,910.00 in damages because it had sent the debtor nine collection letters after the case was filed and also called her asking for money despite having notice of the filing. At the trial, the bank’s representative testified that its operations division does not stop sending collection letters to its customers even if they tell the bank that they had filed for bankruptcy. The court found that the bank did get notice of the filing from the Clerk’s Office and therefore should have ceased all collection efforts. Because it did not, it was liable to the debtor for damages, including reimbursing her attorney’s fees and punitive damages. Many of my clients have received funds from creditors who violated the law by continuing collection activity after the bankruptcy case was filed.
The lesson is that if you filed for bankruptcy and still continue to receive collection letters or harassing phone calls, you should let your attorney know. You may be entitled to damages including punitive damages.
Laura Margulies is a principal in the firm of Laura Margulies & Associates, LLC. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia. Please visit our web site at www.law-margulies.com for more information about the firm.