The Pre-bankruptcy Collection Process and How to Stop It

Posted by Kevin Ryan | Aug 05, 2016 | 0 Comments

Let's begin with this one simple principle:   Creditors will stop harassing you completely once you have filed a case in the United States Bankruptcy Court.  Before that happens, the general process of collection should be considered, if only to inspire you to contact a bankruptcy lawyer sooner rather than later.

Collection Calls 

One of the most frequent complaints voiced by a prospective new client is that creditors are constantly harassing them.  Collection calls can come from either the actual creditor, or later from a third party collection company, attorney or law firm.   Most people learn that they can ignore collection calls for a period of time with no legal consequences.  Once the claim has been transferred to a law firm or attorney within the State of Alabama, however, you can anticipate that the collection process will be shifted into a higher gear.  That higher gear will usually mean the filing of a civil lawsuit in the county of your last known address. The attorney or law firm for the creditor will need to obtain personal "service" upon you, meaning the Court must verify that you received a copy of the Complaint and Summons. The Complaint sets out the nature of the claim (usually stating that you breached a contract with the creditor)  and the amount of damages claimed.  

Complaint and Summons

Once you have been served with the Complaint and Summons, you will have less than 30 days to answer the Complaint.  If the attorney or law firm can demonstrate to the Court in subsequent filings that you are intentionally avoiding personal service, the Court can order that "Service by Publication" can be utilized. This means that the attorney or law firm can then publish notice of the civil action in an local publication that is distributed in your alleged geographic location.  Once service is established, the Plaintiff ( the creditor through its attorney) can file a  Motion for Judgment by Default if you do not file an Answer, or a Motion for Summary Judgment if you do file a  timely Answer to the Complaint.  

Motion for Default Judgment 

In a Motion for Default Judgment or a Motion for Summary Judgment, the Plaintiff can request damages equal to the amount due under the terms of the contract you signed.   In addition, most consumer debt contracts have a clause that permits a Court to award the creditor all of its court costs, attorney fees and accrued interest under the contract.  In the case of repossession of collateral, such as a vehicle, the creditor can also ask the Court to award monetary damages equal to the costs of transporting the vehicle, selling it at auction, insuring it, etc. It all comes down to what you pre-authorized in the contract.   

Who Do I Call to Answer My Questions? 

Please do not make the mistake of calling the creditor and asking their representatives to answer your questions.  There have been countless times when one of our clients has called an auto lender, bank or credit union and asked if it would cost anything if a vehicle was turned in early. More often than not, the representative assures the client that "yes, you can give the car back with no consequences."  This is of course 100% incorrect, and the client later receives the Complaint and Summons described above.  If that call were made to a bankruptcy attorney, it is possible that a bankruptcy case filing could have been avoided altogether, or possibly the loan refinanced under a Chapter 13 at a lower interest rate and payment ( in some cases where the loan is more than 910 days old, part of the principal balance can be written off in a completed Ch 13 plan where the Debtor is eligible for a discharge). 

Can I be Arrested for Not Paying a Debt?

Unfortunately, there are unscrupulous collection firms who will say just about anything to scare a debtor into paying back a debt.  One tactic which is absolutely illegal is threatening a debtor with arrest or other criminal action based upon non-payment of  a debt.  Pay Day lenders sometimes call and say that closing a pre-authorized checking account for the loan is criminal fraud.   The only time you could possibly be "arrested" in connection with a debt is if you actually did commit a criminal fraud, or, if you were ordered to appear for a Debtor's Examination at District Court or Circuit Court and you fail to appear.   A Debtor's Examination would only occur in cases where you are sued by the creditor, a judgment is obtained, and the creditor has moved all the way forward on the case where they have started post-judgment collection proceedings ( wage garnishment, bank attachment, etc)   

There are many other nuances to the collection process which we can discuss on the phone or in a free office consultation.  The bottom line is that a bankruptcy case filing will stop all of these creditor actions by way of "The Automatic Stay Order," ( 11 U.S. Code, Section 362). The automatic stay order is issued by the U.S. Bankruptcy Court against ALL of your creditors the minute you file the bankruptcy case.  The automatic stay order in a Chapter 7 plays out differently than in a Chapter 13 or Chapter 11 case, and you should discuss with your attorney as soon as possible which debts you should continue to pay ( in most cases, your home mortgage loan(s) or auto loan(s) need to be specifically addressed in terms of what you need to keep paying directly to the creditor post bankruptcy). 

If you have questions about the collection process, or need to stop a collection firm from harassing you, please....   Call me.  I'll BE there for you.

About the Author

Kevin Ryan

"I'll never be the kind of attorney your creditors want me to be. I'll always be the kind of attorney you NEED me to be. Call me. I'll BE there for you. And I'll make them go away."  -Kevin Ryan, Attorney at Law Kevin Ryan is a graduate of the College of Wooster and the Cleveland Marshall College of Law. He is admitted to practice before all Alabama State Courts, the United States District Court for the Southern District of Alabama, and the United States Bankruptcy Court for the Southern District of Alabama. The United States Bankruptcy Court is a part of the United States District Court. Since 1998, Mr. Ryan has represented thousands of individual clients in bankruptcy, criminal, divorce, probate, personal injury, and real estate matters.  Attorney Ryan is also a licensed real estate agent in Alabama.  He handles  Bank-owned properties, short sales, and conventional sales in addition to conventional real estate listings.   This wide range of experience enables Attorney Ryan to take a wider look at your legal matter. It is important to consult with an attorney who can see from experience how other legal issues may affect your situation, and advise you accordingly. Personal Info Kevin Ryan is a member of First Baptist Church in Silverhill, Alabama. He resides in Silverhill with his wife Jessica and their three children. Committed to helping our Clients achieve a fresh financial start Our practice focuses primarily on consumer bankruptcy matters under Chapter 7 and Chapter 13 of the United States Bankruptcy Code.  Our law practice also includes matters where bankruptcy litigation, appellate work, or involvement in civil lawsuits is needed by a client.     No representation is made that the quality of any of these legal services is of higher quality than another attorney or law firm.   The United States Bankruptcy Code requires the following notice:  We are a Debt Relief Agency, which means we help people get legal relief from their Debts through the bankruptcy process. Interested in learning more about our bankruptcy attorney near Mobile, Alabama? Contact Us for help with chapter 7 bankruptcy or chapter 13 bankruptcy in Mobile, Baldwin and Washington counties. Education Juris Doctor, Cleveland Marshall College of Law, 1997 Employed full time as a paralegal while attending law school in the evenings. B.A., The College of Wooster, 1994 NCAA Div.III All Conference (N.C.A.C.) Football Team : Defense 1993; Most Inspirational Senior Award 1993; Co-captain 1993; Letterman 1991-1993; Phi Sigma Alapha Fraternity 1991-1994; Athletic Director Jurisdictions Admitted to Practice Alabama


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I'll BE there for you.

I'll never be the kind of attorney your creditors want me to be. I'll always be the kind of attorney you NEED me to be. Call me. I'll BE there for you. - Kevin Ryan, Attorney at Law