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The Real Effect of Illusory Debts after Bankruptcy

March 3, 2013

Your personal bankruptcy may have been costly, emotionally painful, and time-consuming. The good news was supposed to be that your debts were discharged and debt collectors and credit reporting agencies were supposed to record your changed status. For you and your family, however, this fresh-start may not yet have occurred.

If your bankruptcy was finalized with a court order, your old debts should have been discharged. Therefore, any remaining reference to them by a credit reporting agency, credit card company, or collection agency would be in error. In effect, these debts are illusory. Nevertheless, if these third parties believe they exist, these debts can still have a meaningful effect on your financial life.

Section 524 of the Bankruptcy Code provides for a discharge injunction which prohibits collection efforts by pre-petition creditors. These firms cannot deny credit, make collection calls, or file lawsuits against you in an effort to collect those debts. Nevertheless, through harmless errors and intentional ones, some creditors attempt to collect on those debts. The good news: if your debts have been discharged, you have the upper hand when it comes to their legal claims. In fact, the harassment you’ve experienced may serve as the basis for a legitimate counterclaim.

Want to find out your post-petition options? Talk to the professionals at the law firm of Fears Nachawati today. With years of experience and dedicated expertise, we know how to advise you during this stressful time. Contact us today!


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