Violations of the Bankruptcy Discharge

Once you have received a bankruptcy discharge, your past creditors are supposed to stop trying to collect debts from you, right? While going through a Chapter 7 or Chapter 13 bankruptcy should result in previous creditors ceasing to attempt to collect on debts you no longer owe, sometimes creditors or debt buyers are persistent, even after you have provided them with a copy of your discharge order. While it can be extremely frustrating to receive a bankruptcy discharge only to be hounded by creditors, there are steps you can take against these actions.
In addition to collection after a bankruptcy discharge, sometimes creditors do not abide by the rules even earlier in the process. A recent Illinois case, Melnarowicz v. Pierce & Associates, makes clear that creditors must abide by the Fair Debt Collection Practices Act (FDCPA) when a debtor files for bankruptcy. The particular case involved a Chapter 13 bankruptcy and a mortgage foreclosure. If we take a closer look at the case, it can help us to understand what one kind of bankruptcy discharge violation looks like.
Chapter 13 Bankruptcy and the Foreclosure Stay
Before we get into the facts of the case, it is important to understand some background information regarding Chapter 13 bankruptcy and foreclosure. One of the benefits of filing for Chapter 13 bankruptcy instead of Chapter 7 bankruptcy is that it can stay a foreclosure case. While a Chapter 7 filing may slow down the foreclosure process, it does not come with the automatic stay of a Chapter 13 case. In other words, if you are behind on your mortgage payments but you do not want to lose your home, filing for Chapter 13 bankruptcy may be able to benefit you. How can Chapter 13 benefit you if your home is going into foreclosure?
In short, filing for Chapter 13 bankruptcy will allow you to reorganize your debts and come up with a payment plan for your creditors so that you do not have to liquidate your property. When you file, there is an automatic stay that prevents your creditors—including your mortgage lender—from continuing to collect on your debts. Generally speaking, this includes efforts to continue with a foreclosure, as the recent Melnarowicz case emphasized.
Violations of the Fair Debt Collection Practices Act
In Melnarowicz, the plaintiffs fell behind on mortgage payments and the defendant started foreclosure proceedings. Approximately one month later, the plaintiffs filed for Chapter 13 bankruptcy and the defendant knew about the bankruptcy petition. However, after learning about the Chapter 13 bankruptcy, the defendant served the plaintiffs with a “Notice of Initial Case Management Conference,” a document connected to the foreclosure. The plaintiffs argued that serving the notice violated the FDCPA and the automatic stay in a Chapter 13 bankruptcy.
The court began its analysis by looking at the language of the FDCPA, which holds liable “any debt collector who fails to comply with any [of its] provision[s].” Given that the defendant conceded to being a debt collector, the question for the court was whether the defendant “failed to comply with any of the Act’s provisions when, despite the bankruptcy stay, it was mailed to the [plaintiffs] the case-management conference notice.”
The court determined that “the sending of the notice did violate the Act.” It reasoned that the FDCPA’s prohibition of “false, deceptive, or misleading representation or means in connection with the collection of any debt” is a “broad prohibition.” The defendant implied that a certain outcome could happen to the plaintiffs—that they could still lose their home despite the Chapter 13 filing and automatic stay. By doing so, the defendant had engaged in false, deceptive, or misleading practices in debt collection.
Violations of the bankruptcy discharge and the automatic stay are illegal, and it is important to hold debt collectors liable. If you believe you have been the subject of a violation of the FDCPA, you should speak with an experienced Oak Park consumer bankruptcy attorney as soon as possible. Contact the Emerson Law Firm to learn more about how we can assist you.
See Related Blog Posts:
Filing Bankruptcy for a Second Time

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