If companies attempt to collect debts from you that have been discharged in bankruptcy you may be eligible for damages.

Bankruptcy can be a personal nightmare. You may have flashbacks to that nightmare when a bill collector calls trying to collect a debt that has been discharged by bankruptcy. Sad to say, doing things the right way and having the law on your side won’t necessarily prevent bill collectors from coming after you for “zombie debt.” This refers to debt that the collection agency still has on the books but is legally incapable of collecting. Still, when the collectors start calling, knowing what to say and do about zombie debt can make your life a lot easier.

Declaring Bankruptcy

When you file for bankruptcy your creditors cannot come after you for your debts. This is known as a stay and it applies as soon as your bankruptcy has been filed. If you receive a call from a bill collector who claims to not have knowledge of your pending bankruptcy you should tell him about it immediately. Then draft a letter formally informing the company of your bankruptcy status, sent registered mail with a return receipt requested. This will help you to prove that you notified the company of the facts of your case.

Make sure to keep the receipt and a copy of the letter, as well as documenting all further contact the collection agency makes with you. Attempts to collect the debt after receiving notice of your impending bankruptcy are a violation of the federal bankruptcy code, as well as the Fair Debt Collection Practices Act.

What Discharge Means

Discharge occurs when your bankruptcy has been finalized. A judge issues an order erasing most of your debts. The law not only prohibits collection agencies from being able to collect such debts, it prevents them from contacting you about discharged debts in any way whatsoever. Former creditors may not sue you in civil court for discharged debts, nor may they report these debts to credit reporting agencies.

If a creditor contacts you to collect a discharged debt you should inform the company of your bankruptcy status in the same manner as a creditor trying to collect during a stay. Keep detailed records of all correspondence from credit agencies and deliver them to your attorney. Your attorney will be able to inform you of what damages, if any, you are eligible to receive in civil court from creditors who illegally attempt to collect discharged debt.

Why Collection Agencies Do It

After learning that creditors cannot legally collect on discharged or “zombie” debt you are probably left with the question: “Why?” The short answer is that these creditors are unethical, engaged in illegal business practices and looking to pull a fast one on you. Often times, a creditor will claim that your discharge did not cover interest, fees or some other part of your debt. These are generally third-party collection agencies that hope you are too frustrated or confused to realize that the debt they are trying to collect has been or soon will be discharged.

The Importance of Careful Accounting

When you go to bankruptcy court, the discharge process is perhaps the most important. You are likely declaring bankruptcy because you wish to get out from underneath a large mountain of debt. Keep in mind that any debts not claimed on your bankruptcy paperwork will not be discharged. Still, if a creditor is attempting to collect debts that you no longer owe, the best course of action is to contact your bankruptcy attorney. This person is familiar with your case and should be able to offer you legal advice and assistance specific to your circumstances.