What Happens If a Creditor Attempts to Collect on a Debt that Has Been Discharged?

Person Holding Past Due Bill Envelope

What Are Your Options If a Creditor Attempts to Collect on a Debt That Has Been Discharged?

If you successfully make it through the Chapter 7 bankruptcy process, the bankruptcy court will issue an order discharging certain debts in exchange for the sale of some of your property. A discharge means that you no longer have any legal obligation to repay the debt. But, what happens if the creditor simply ignores the court order and starts sending letters or making phone calls? Can you enlist the power of the court to protect yourself?

Violation of a Bankruptcy Court Order

A party’s failure to follow or abide by the terms of a bankruptcy court order constitutes contempt of court and provides the court with a number of remedies. Accordingly, if a creditor makes any attempt to collect on a discharged debt, you should immediately notify the court. You may have to file a complaint with the court, which means you will incur some costs and legal fees.

The court may do any of the following:

  • At a minimum, the court can issue an injunction instructing the creditor to follow the terms of the prior order. However, if the creditor was willing to ignore the first order, it’s not unlikely that the creditor will also refuse to comply with the injunctive order.
  • The court may find the party in contempt and assess fines and penalties, including court costs.

Here are a couple caveats with respect to attempts by creditors to contact you after a discharge:

  • A creditor may still enforce a lien after a discharge—the discharge applies only to the obligation to make payment. Typically, the lien gives the creditor the right to reclaim collateral.
  • The debt is discharged whether it has been assigned to a collection agency, attorney or other third party. Don’t let a collection agency try to tell you that the discharge only applied to the original creditor.

Contact Heath, Texas | Bankruptcy Attorney Carrie Weir

I provide a free initial consultation to anyone with questions or concerns regarding a bankruptcy filing. Contact my office by e-mail or call me at 972-772-3083 for a private meeting. With offices in Rockwall, Texas, I represent clients in Heath, Greenville, Lavon, Wylie, Mesquite and Rowlett.

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