Dealing With Creditors After Your Bankruptcy Is Finished

Category: After Bankruptcy (20) comments

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.

dealing with creditors after bankruptcy

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.

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  1. AP

    What about a debt that arises during bankruptcy? For example, a fine as a result of professional misconduct from regulatory body whose disciplinary process is not stayed by the bankruptcy. If the discharge relates to all debts incurred before filing of an assignment, does this debt get caught by the bankruptcy?

    1. J. Douglas Hoyes

      No, only debts that exist prior to bankruptcy are included in a bankruptcy.

      Since you are describing a very specific debt (a professional misconduct fine) you should seek professional advice to review the specifics of your situation.

  2. Cristina m.

    Hi there
    I have been discharged from a bankruptcy back in December 2014.
    The debts included in it appear as derogatory accounts or in collections write off with 0 amounts owing. Is that the correct way they should appear on my credit bureaus?

    As well one of my debts secured against my old home is listed under secured and unsecured claims in the final dividend sheet. Is that correct? It looks like it’s double posted and accounted for two e so it looks like I owed 2 loans instead of 1 and they are the same thing.

    I filed my bankruptcy with mnp ltd.

    Thank you

    1. J. Douglas Hoyes

      Hi Cristina. Credit bureaus are somewhat inconsistent, but what you describe is probably correct. I would suggest that you contact your original trustee, who has all of your paperwork, and ask them to compare your bankruptcy documents to your credit report to ensure that everything is being reported correctly.

  3. Kristen

    I’ve been discharged from bankruptcy for 9 months. Is it ok to go back to the same bank-CIBC- and open a joint savings account?

    1. J. Douglas Hoyes

      Legally, yes, you can. I would suggest that you closely monitor your account to make sure that nothing is accidentally taken from it (which shouldn’t be an issue, since your bankruptcy is over and it’s a new account).

  4. Xander

    Why would a creditor be permitted to exclude themselves from a bankruptcy, particularly if that creditor is the only creditor? Can you point me to some literature on the subject?

    1. Ted Michalos Post author

      Have a look at Section 178 of the Bankruptcy and Insolvency Act – it sets out debts that are not “dischargeable” by bankruptcy. So it is not that a creditor may have themselves excluded, it is more if they can prove their debt falls under one of the clauses of Section 178 their debt “survives” the bankruptcy process.

  5. Donna

    I was in a car accident in 2007. In Jan or Feb 2009 the insurance company filed with the courts to get their money. I was never notified about anything. In March 2009 I filed bankruptcy and put the insurance company as a debt. I didn’t know what I owed but out the amount from the one bill I got. Last week I was served with a notice to make a statement of defence…. Regarding this debt and insurance company. Apparently the claims person didn’t know I filed bankruptcy. I and my trustee sent the original files that show they were included. Are they able to go after me now 10 years later? I thought my bankruptcy took care and all was done. Now all there’s years later they have been after me in the supreme Court not knowing I filed bankruptcy. They, not the lawyers ever did an insolvency search… I gave the info to the insurance company and they said they would pass it to their legal team to decided if they will proceed… Is that even possible to come after me 10 years after I included them in my bankruptcy?

    1. J. Douglas Hoyes

      If the debt existed when you filed bankruptcy, it is dealt with in the bankruptcy. You should contact your trustee and ask them to issue a stay of proceedings to stop the legal action.

  6. Donna P.

    Does a new lawyer do this or my trustee? Do I have to pay for this as I feel I’ve already paid for a bankruptcy? I have sent my trustee an email requesting what you have mentioned. What is a stay of Proceedings’?

    1. J. Douglas Hoyes

      This is something for your trustee to deal with. If your trustee has not responded to your email, phone their office and request an in person meeting with your trustee (not a clerk) and explain the issue and ask them to assist in dealing with the problem.

  7. Simon

    I have been discharged from a 9 month bankruptcy.

    Both credit bureaus show under “Public Records” that the bankruptcy is “discharged”

    Scotiabank is showing both of my accounts with them as “Collection/Charge Off” after the fact – the Visa is still showing a payment amount and a revolving account status with this in the remarks section:

    [Account Included in Bankruptcy]|[Third Party Collection/Account Turned over to Collection Agency]

    The second account (overdraft from chequing account) is also showing as “Collection/Charge Off” but as an installment account – a payment amount is also being listed with this in the remarks section:

    [Account Included in Bankruptcy]|[Bad Debt Write Off]

    Is this accurate? I have received my letter of discharge from my trustee… If I read correctly in this article, the status of these 2 accounts should now show “discharged” with no balance/payment amount?

    Please let me know.

    Thank you!

    1. Ted Michalos Post author

      It is a little more complicated than that – your discharge releases you from repayment of the these debts, but the debts themselves aren’t discharged until your bankrupt estate is closed by your trustee. Depending on whether or not they are waiting for any tax returns to be assessed by CRA this may take a few months to happen.

  8. Lee

    Hi, this is a great site and resource. I was discharged from bankruptcy in 2015 and have had to fight with Equifax and Transunion to continually correct wrong information on my reports relating to accounts that were included in the Bankruptcy. As such, RBC is STILL showing a Visa and Line of Credit accounts as being “Open” and reporting to my credit bureau with late payments which is severely damaging my credit score (which I have impeccably worked to rebuild) Even though these accounts are explicitly listed in my bankruptcy my repeated attempts to have them removed from my report have resulted in no action and they continue to diminish my credit. I am at my wits end? Should I contact my original trustee from four years ago? Is there anything I can do?
    Thank you in advance.

    1. J. Douglas Hoyes

      Hi Lee. Unfortunately it is very common for the big banks to report inaccurate information, and Equifax and TransUnion are slow to make corrections (because they work for the big banks, not for you). I would suggest the following approach:

      First, contact your original trustee and confirm that RBC actually filed a claim in your bankruptcy. It is possible that they didn’t, which may be why the account is still showing as open. If that’s the case, your trustee can send them another copy of your original creditor’s package.

      Next, fill out the dispute resolution form that you get with both your Equifax and TransUnion credit reports, and report the issue again. Often it takes more than one request to get them to fix it.

      Finally, information automatically purges from your credit report in six years, so if there has been no activity on your account since 2015 (or before), it will automatically purge in 2021 (which is small consolation for you now, which is why you want to do the first two steps first). Hope that helps.

  9. Susan

    We filed for bankruptcy 14 years ago and this was our first and only bankruptcy. We were released from it after the allotted time period. Our Sears debt on the card was part of the bankruptcy. Now that Sears has closed and Scotiabank has the files, our debt has been handed to a collections agency. This is ridiculous as this debt was part of the bankruptcy filed 14 years ago. This has affected our credit scores. What can we do? Scotiabank is also our bank and our mortgage provider. This problem has just turned up in the past couple of weeks. Thank you.

    1. Ted Michalos Post author

      This is becoming more of an issue for people as a couple of “new” players have entered the business of buying old accounts and they are trying to collect on debts that have been discharged by bankruptcy or a proposal. If you still have the bankruptcy (or proposal) documents you can dispute the debt with the people trying to collect or with the credit bureaus (or both). If you do nothing the damage will continue and the collector might even try and get a new judgment against you to enforce the debt. That will be even more difficult to fix. There is also something in Ontario called the Limitations Act – this is a defense in Court against debts that you haven’t acknowledged in more than 2 years. To utilize this defense you send the collector a registered letter (or couriered) demanding they cease and desist collection action and take you to Court. Of course you need to attend in Court if they do…


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