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What to Tell Creditors Before Filing Bankruptcy

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I’ve written frequently on how to deal with pesky debt collectors and other creditors, but some debtors might want to know how to handle these entities once they’ve decided to file bankruptcy but before they’ve done so. This middle period, usually beginning once debtors have settled on a lawyer, can last for a few weeks, unless debtors are facing a time crunch like a looming foreclosure. It might sound inconvenient, but this gap gives debtors time to gather the information their New York bankruptcy lawyer asks for and complete the required pre-filing debtor-education courses. So the question is, what do you tell creditors just before you file?

The real issue here is what you’re trying to accomplish. If you want the creditor to stop contacting you about the debt, even for just a few weeks, then the best course of action is to go through the motions by writing it a letter based on the Fair Debt Collections Practices Act (FDCPA). A letter from a debtor will compel the debt collector by law to stop calling you, and in this circumstance you would direct it to your bankruptcy lawyer. That you plan on filing bankruptcy soon doesn’t matter. Although, once it receives the letter and the notice of your bankruptcy filing, it will understand there are serious penalties if it persists in reaching out to you. Recently, the U.S. Supreme Court held that bad-debt buyers are not debt collectors under the FDCPA, so your FDCPA remedies may be limited depending on whether the agency contacting you is a third party or a primary creditor.

The one thing not to do is bluff the creditor by saying you’ve already filed bankruptcy when you have not. It won’t take long for the creditor to learn that you have not in fact filed and will keep calling nonetheless, or it might file a lawsuit against you in the hope of accelerating its repayment right and needlessly complicating your bankruptcy. If you are going to say anything, tell the creditor that you’ve retained counsel to file bankruptcy. Then give them your bankruptcy lawyer’s contact information and redirect its communications to your attorney.

Keeping creditors in the dark won’t do much good either. From the creditor’s perspective, all it knows is you’re avoiding its calls. It knows nothing about your plan to file bankruptcy, so it may consider filing a lawsuit in that instance as well. The whole point of calling you is to convince you to pay it voluntarily. Once it believes you will not do so, it will compel you to pay involuntarily.

In short, treat the creditor like you’re not filing bankruptcy (until you do). If you do feel the need discuss anything with the creditor, then simply direct it to your counsel with as little additional information as possible.

For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.

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