If you are in debt, you may already be familiar with the protections you have against creditor harassment under Wisconsin and federal law (i.e. the Fair Debt Collections Practices Act). These laws protect you against debt collectors using misleading or abusive tactics when attempting to collect a debt against you. However, you may not know what happens if creditors attempt to contact you about a debt during or after bankruptcy. Fortunately, you have legal protections if this occurs.
Protections during bankruptcy
Once you file bankruptcy, the automatic stay becomes effective. While the stay is in place, creditors are legally prohibited from doing anything to collect a debt against you. This includes contacting you, suing you or taking back collateral that secures a debt against you, such as your house in a mortgage or your car in a car loan.
Although most creditors respect the stay, from time to time, there are a few that do not. If a creditor violates the stay by attempting to repossess collateral, you are entitled to ask the bankruptcy court to order the return of it.
In addition, for all violations of the stay, you are entitled to seek damages for violations from the errant creditor. In cases where the creditor knew or should have known that the stay was in effect, you may collect compensation for any actual losses you suffered because of the violation. Additionally, you may recover attorney’s fees to compensate you for asserting your rights. In extreme cases, you may also recover compensation for emotional distress and punitive damages.
Regardless of whether damages are awarded to you, the court can punish creditors who violate the stay. Since the stay is a court order, the court has the discretion to sanction any creditor that violates it for contempt of court, which can entail fines and assessments for court costs.
Protections after bankruptcy
Once you have completed bankruptcy, you have received a discharge of many of the debts you owed before bankruptcy. Legally, this means you never have to repay them. However, some creditors may attempt to contact you about your discharged debts and attempt to persuade you to repay them. However, this is illegal and is punishable by law.
If a creditor violates the discharge order, you have many of the same rights as you do for stay violations. As a result, you may recover any actual losses you incurred because of the violation plus attorneys’ fees. Additionally, the creditor may face contempt of court sanctions and be forced to pay fines and court costs.
An attorney can protect your rights
Although most creditors obey the law, there are a few bad apples out there. Fortunately, for stay and discharge violations, it does not typically cost you anything to fight back against creditors who do not respect the law, since your attorneys’ fees may be recovered in the process. If you are experiencing creditor harassment at any time, it is wise to speak with an experienced bankruptcy attorney to learn about your options and receive recommendations regarding the best way to proceed.