There are many periods during which you, and your trustee, will need to talk to your creditors about your bankruptcy. Before filing, you may be receiving collection calls and need to take advantage of the Stay of Proceedings offered by filing bankruptcy. Once you have filed bankruptcy or a consumer proposal, your creditors will be notified of your bankruptcy so that collection calls can stop.
Even after completing your bankruptcy, there can be potholes in the road – pre-bankruptcy creditors that rear their ugly heads. It doesn’t happen often but it can. There are three main reasons why a creditor might contact you after your bankruptcy is finished:
- Creditor’s Error: Your creditor has not correctly recorded your bankruptcy in their documents or forwarded the information along to their collection department or outside collection agency. This is an honest error and can happen.
- Coercion: Your creditor tries to coerce you into paying anyway. We have seen this in the case of payday loan companies. They attempt to bully you into paying because after all you had the use of their money. Do not fall for these tactics. You have no legal obligation to repay creditors whose debts are discharged in your bankruptcy.
- Omission: You may have forgotten to list a creditor with your bankruptcy documents and as a result your creditor does not even know about your bankruptcy.
How to deal with each of these scenarios is fairly similar. The first step is to understand what your bankruptcy means in terms of your debts and next, how to proceed if your creditors call you.
Your Bankruptcy Trustee Is Your Best Resource
The easiest answer if a creditor contacts you, both during and after your bankruptcy, is to look to your trustee for advice. You can simply refer the creditor to the trustee that handled your bankruptcy or contact your trustee directly yourself with the creditor’s information. Your trustee can advise you on what paperwork you can forward to your creditor, or if the situation warrants they may contact your creditor for you.
Understanding What Your Discharge Does
Let’s start with understanding your discharge from bankruptcy and what that means. Discharge is the technical term that means you have completed your bankruptcy and are therefore no longer legally responsible for the debts that were included in your bankruptcy. At this point the debts aren’t necessarily gone – you just can’t be made to repay them. The debts themselves disappear when your trustee is discharged from your bankruptcy. This step happens after your discharge and depending on the time of year and complexity of your bankruptcy, may take months to happen. The trustee’s discharge is what closes a bankruptcy file and eliminates the debts permanently.
Talking To Your Creditors
If you have recently been discharged from your bankruptcy then the first thing you should do if a creditor contacts you is direct the creditor to your trustee. If your trustee hasn’t been discharged then it is likely that your creditor may not have processed your bankruptcy correctly and that may be easily corrected by your trustee’s office.
If your trustee has been discharged (your bankruptcy is long finished) then you may have to send (by fax, mail or email) copies of your bankruptcy documents to the creditor yourself. Your creditor will want to see proof that you have been discharged and a copy of the Final Statement of Receipts and Disbursements from your trustee. You should keep copies of your bankruptcy documents in a safe place in case you ever need them after your bankruptcy. If you don’t have a copy, again contact your trustee.
In the very rare instance that the creditor persists after you have provided them with this information you should send them a registered letter requiring them to cease collection actions and take you to Court. If a hearing is scheduled you simply provide the Court with the same documents – your Certificate of Discharge and the Final Statement of Receipts and Disbursements – and the judge should dismiss the case and order the creditor to pay you for your time in Court.
Creditors Who Were Never Notified
The above noted instructions will allow you to deal with a creditor that was listed on your bankruptcy documents that tries to collect after your bankruptcy is finished. However it is possible for a creditor to appear after your bankruptcy is finished where the creditor wasn’t listed on your bankruptcy documents (in other words a pre-bankruptcy debt that was never notified about your bankruptcy because you didn’t tell your trustee about the debt when you filed).
This type of debt may still be dealt with by your bankruptcy. If your trustee hasn’t been discharged yet then simply tell the creditor to contact your trustee and they will still be able to participate. If your trustee has been discharged then the creditor is entitled to the same rate of return that all of your other creditors received from your bankruptcy. This may sound complicated, but it is not.
The last page of the Final Statement of Receipts and Disbursements is called the Dividend Sheet. It shows you how much each creditor was paid at the end of your bankruptcy. In many cases it is literally zero – that is, your creditors were not repaid any portion of your debt. The creditor that wasn’t listed has the right to receive the same rate or repayment that the creditors; that were listed in your bankruptcy received. If they all received nothing then the new debt is entitled to nothing. If they received 5% then the new creditor is entitled to 5%. Most creditors don’t bother once they realize how little they are entitled to receive.
There is one more option for a creditor that wasn’t listed on your original bankruptcy documents. If the creditor can prove that you deliberately left them off the list so they would not be notified of your bankruptcy then the creditor may ask the court to allow their debt to survive the bankruptcy. The onus however is on the creditor to prove you knew about the debt and therefore excluded it on purpose.
As you can see, filing bankruptcy is a legal process that provides you with a framework to not only eliminate your debts, but deal with your creditors after your bankruptcy is completed. This is one of the major advantages of using a formal debt relief mechanism under the Bankruptcy & Insolvency Act, whether personal bankruptcy or a consumer proposal. Once notified & dealt with, collection calls will stop by filing bankruptcy.