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“One of my creditors told me that if I file for bankruptcy, they can still try to collect from me.”

This is a common tactic used by creditors. They basically tell you that regardless of your bankruptcy filing, the collection agency can still come after you for your credit card debt (or medical bills, or payday loan, or whatever).

This is not true (but then, most creditors aren’t really interested in telling you anything true about bankruptcy; their only goal is get as much money out of you as they can). When you file a bankruptcy (either a Chapter 7 or Chapter 13), there is legal device that is immediately put into place called the ‘Automatic Stay’. The automatic stay stops all the bad stuff that is currently happening to you (like harassing phone calls, garnishments, repossession, foreclosures, lawsuits, etc). Think of it as a protective shield that the federal courts put around you. It prevents your creditors from coming after you anymore.

Regardless of which type of bankruptcy you file, the end result is almost always the same: your debts are discharged (in other words, wiped out). It’s true that there are a few cases where someone has to file a Chapter 13 and pay back some of their debts. But for the vast majority of cases, the unsecured debt (like credit cards) is knocked out.

So why in the world would a creditor or collector tell you that even if you file a bankruptcy, they can still come after you? There are probably a few reasons I could list (like they don’t know what they’re talking about). But I think the main reason is pretty straightforward: they are trying to scare you out of filing. Because they know that if you file a bankruptcy, all that debt you owe is going to get discharged. They know that once you file, they can’t harass you anymore. They know that once you file, you no longer have any legal obligation to pay them anything ever again. So of course they are going to use just about every tactic they can think of to prevent you from filing in the first place.

I had a client not too long ago, and she was a pretty easy Chapter 7. She had credit card debt, some medical bills, a couple payday loans, and there was a pending garnishment on her wages. When I met with her for the first time, she looked as if she had been in a war. She looked as if she hadn’t slept in months. Her voice was literally weak from exhaustion. As we went through her consultation, it became pretty clear to me that her case was going to be an easy one. There were no major hurdles, and nothing that stood out as a problem. When we got done discussing her debts, income and assets, I told her that she was going to be a simple Chapter 7. I explained that all the money she owed would be discharged, and she’d be debt free in a few months.

She immediately started crying. But not because I had told her that I thought the case would be easy. Rather, she had assumed that only some of her credit cards would get discharged, and some would remain. I asked her why she thought this (because sometimes when you charge up a bunch of stuff on a card and then turn around and file for bankruptcy very soon thereafter, the creditor tries to prevent that particular debt from getting discharged). She told me that one creditor had convinced her that American Express cards could never be discharged because they had a special agreement with the government. Evidently, this poor woman had been enduring harassing phone calls, nasty letters, and the constant threat of a lawsuit and garnishment for over a year. All because of the incorrect (and ridiculous) claim that her debts were somehow forbidden to be part of a bankruptcy by the federal government.

This one story out of thousands that I’ve heard over the years. And the creditors continue to employ them because it has the desired effect. And that is to scare you out of filing for bankruptcy. But if you’d like to speak with an experienced St. Louis bankruptcy attorney about how the process really works, please do call today. Phone and office consultations are free of charge!