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Listener Bankruptcy Questions – June 2016 Interview

Katherine: Hey Peter this is Katherine and we are here to talk about bankruptcy as we do every month with you. I’m ready to jump in. These questions get better and better and I learn so much in each question. Obviously our listeners do too, then they have more questions, so welcome back.
Peter Daigle: Thank you Katherine. It’s always a pleasure to talk to you. I look forward to our call.
Katherine: Listen, our first question here is what can my creditor do to me if I don’t file bankruptcy?
Peter Daigle: Okay, they have lots of options available to them. They can, well, generally what they’re going to do though is they’ll put a collection agency on you and hound you. Obviously your phone is going to ring and they’ll send you all kinds of letters. More aggressively, they can file a law suit against you in the state court. Most likely if it was a credit card application you’d have signed an application saying you promised to pay and with that application and your signature, it allows them to file a law suit against you in state court. If they do that, then they can do things like garnish your wages, they can attack your bank account. They have options available to them to collect if you don’t pay. Those actions would happen in your state court, local court but a bankruptcy would stop all that even if they’ve already started the process. No matter how far into that process they are, the bankruptcy would put a stop to it.
Katherine: Okay, okay. What about, can’t I just wait 7 years for my creditors to just go away? This question, I was like, can’t you? As I’m looking over what’s being sent to me to ask you because I’ve heard that. I don’t know how much truth is in that. I don’t know really where that originated. Some people say in the bible. Is that an option to wait 7 years and the creditors aren’t supposed to call you anymore?
Peter Daigle: Okay, as far as that goes, it depends on what kind of agreement you have. If you signed a promissory note which is a promise to pay it can go on over 6 years. It would be 6 years and not 7. Essentially basic other contract debt like credit card debt, medical bills, utility bills and the like, the rule is 6 years but during that 6 year period you cannot have made a payment. Even if you had paid $10 towards your debt anytime during that 6 years then the 6 years would restart. If you’ve got 5 years and 364 days and you paid $10 on it, you’d start the 6 years rolling again. Make sure if you’re going to do that, that you don’t pay anything towards it because making a payment towards is then that would stop the process again.
Katherine: Okay, all right. What if I file bankruptcy but a creditor contacts me anyway?
Peter Daigle: That’s against the law. What would happen was if that were to occur, you would contact your bankruptcy attorney and he would get the court involved, the bankruptcy court. The judge assigned to the case would have an interest in that. I can say that it doesn’t really, it doesn’t normally happen. It would be rare. It’s mostly for creditors that aren’t your institutional creditors like MasterCard, Visa, American Express or a bank. They’re essentially individuals that may have been listed on the case.
Let’s say you’re a builder and you owed the paint from the foundation guy and the plumber money then possibly those folks may violate what’s called the automatic stay but generally your institutional creditors and your collection agencies take note of the bankruptcy filing and they will not call you. There’s quite a stiff penalty that can be assessed against them if they do continue to call. Most of them have learned the hard way that they can’t be contacting people after they’ve filed.
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Katherine: Contacting my bankruptcy attorney would be the way to handle that not …
Peter Daigle: … Exactly. Right away. That’s right away.
Katherine: Okay.
Peter Daigle: Chances are they don’t know. What happens a lot of times is that for seconds it’s a MasterCard bill that you may mail the payment to one place and the notice of the bankruptcy is sent to another place, and then the call comes from a third place. Sometimes internally it takes time for them to become aware that you’ve filed. Generally that’s what happens, they have not received notice of a filing is why they call. Once they get their notice, they generally stop.
Katherine: Okay, okay. Don’t you go trying to handle it yourself and threatening anybody, just call your bankruptcy attorney and continue to go through your process. I think about all the times that I’ve ever had a bill collector call me, it’s stressful. It feels stressful and you don’t like it and you feel like you’re under water and you just want help and if you’re going to get help, going into bankruptcy, your mind may automatically think, I knew this was a scam, it doesn’t work. I think this is a very good question here because people now have the reassurance, wait a minute, there is a process. Just because I filed doesn’t mean everybody has the information yet. It does take a while. If you think, you step back and not be emotional, step back and it does take a little while for everyone to get up to date.
Think of any notice you’ve ever gotten and they said, “30 days from now we’re going to be making some changes.” You may not have opened that letter until the 29th day but they get through the notice, everyone isn’t getting the information at the same time. Extend some grace because during bankruptcy we’re expecting grace as well because we’re looking for a fresh start. We just want to get back on our feet and we understand the frustration that you’re going through but we have attorneys, they are here to help you navigate through these things so you’re not getting yourself more frustrated. I can just imagine someone saying, “I’m going to have my attorney on you.” There’s no need to do that, just call your attorney and let them know what happened. They will take care of it. If it doesn’t stop after that …
Peter Daigle: … The attorney would bring it to the attention of the judge and that would be the end of it. It happens occasionally. Probably once a year and we do hundreds of filings. We’ll have a problem with a creditor but the judge will sanction them, charge them a fee. It will be thousands of dollars too so they’ll get woken up to the fact …
Katherine: … They will understand.
Peter Daigle: Yeah like I’ve said, I’ve seen them as high as a quarter million dollars getting sanctioned.
Katherine: Oh, ouch!
Peter Daigle: Like a Bank of America.
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Katherine: Very expensive lesson to learn. Okay here we are and you have the reassurance. I think what a lot of people would like in life is to have someone to have their back, to be on their side. We’ve talked about bankruptcy before. It’s not this bad thing, it’s something to help you. To know that you have someone that has your back, that’s some reassurance. It’s very emotional when you feel like you’ve failed and bankruptcy is a way to reinstate your self-esteem and get you back on the right track so that you can do better than you did before. That’s an excellent, excellent question. Is it true that there are companies who can wipe out debt without me having to file bankruptcy? Dum, dum, dum. I see these signs as I go driving around my city. Whether it’s credit repair or wipe this out. I always wondered about that. That’s actually my question. I saw that while I was driving. What is to these signs, you know? That’s my question.
Peter Daigle: The answer is no. These companies are not attorneys also and a lot of times they’re out of state companies so they can go ahead and violate state laws, and they are not so concerned because they’re not from around here. There’s no way to legally discharge debt other than a bankruptcy. They may be able to settle the debt for you but you’d have to come up with money to pay a settlement. You can settle most debts anywhere between 20% and 80% of what you owe but they would require to pay it immediately. From folks that are having trouble paying their bills, coming up with money to pay for debt settlement is difficult.
A lot of times you’ve got more than one creditor that’s out there. The creditor could be an easy one to take care of that’s bothering you but then all of a sudden a week or two later, somebody else shows up and it’s impossible to get rid of. Meanwhile you spent your money settling somebody.
Katherine: Not handling the whole problem.
Peter Daigle: Exactly, exactly.
Katherine: Picking the pieces apart.
Peter Daigle: Putting a band aid on one little cut.
Katherine: Yeah we don’t want to do that. We want to definitely heal the situation. Attorney Daigle I want to say thank you. I believe we got all of our questions. This was really good.
Peter Daigle: Did we answer fully about the credit selling to a collection agency. I just want to make sure you’ve got that. You may have been not able to answer on that. I’ll have to fully answer that one.
Katherine: I think you did.
Peter Daigle: Okay so you’ve got on …
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Katherine: … No, no, no, no, we did, uh-oh, audience members you’re going to smack your wrist. What if, I didn’t get the one about the collection agency, so what if a creditor sold my account to a collection agency who is not included in the bankruptcy and they contact me? I did not ask that one. I was like, that was fast! I wasn’t ready to go yet because …
Peter Daigle: … No you jumped the gun. Pump those brakes, hit those brakes a little, tap them brakes.
Katherine: Absolutely, absolutely.
Peter Daigle: Basically on that, it’s really the underlying debt is generally what we list on the bankruptcy petition. Let’s say for a second it was a MasterCard Bill and you didn’t pay it and it was given to a collection agency. We generally list the original debt itself but as a courtesy we will list the collection agency so they don’t contact you in the future. As a matter of principle, we usually will list the underlying debt because that’s what will appear on the credit report. It doesn’t matter if the account is sold 2 or 3 times, which we see a lot of times, as long as the original debt is listed then the debt is discharged in bankruptcy. A lot of times what it is, is just making sure that you list the collection agency on the bankruptcy schedules and they’ll get a notice. If you don’t, the attorney should be able to send a copy of the filing to the creditors or the collection agency that’s continuing to call you.
Katherine: Okay, okay. That’s good to know because I was thinking when I got this question, one, it’s a good question. Then, I was thinking, does it make it new, like it didn’t exist before. Now this new person has popped up. You’re saying that it just sold but it’s really the same creditor? Did I understand right?
Peter Daigle: Right, yes. In other words, it’s just … Generally your credit report will list the underlying debt and not the collection agency and so that’s where we start with the credit reports and the public record search.
Katherine: Okay, all right now we actually have gotten through our questions for this month. I was like it went fast. We got all of our questions. Attorney Daigle, let people know how to get in touch with you and how they can get a copy of your free book.
Peter Daigle: Sure, okay. The best way to access the free book is to go to our website and it’s You can order from the website. If you’d like to speak to me directly, my phone number is 508-771-7444, 508-771-7444 and I’d love to speak to you.
Katherine: Awesome. Until next month, have a wonderful day.
Peter Daigle: Thank you Katherine, bye bye now.
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