Should I Tell Creditors I Am Filing Bankruptcy?

The answer to this question is generally no. When you have a lot of debt (from credit cards, personal loans, medical bills, or a car loan), expect to receive more calls from creditors than you’d like. It isn’t very pleasant to feel like your phone has been taken over and you’d want the calls to stop.

Unfortunately, informing your creditors that you want to file for bankruptcy is unlikely to work. They can continue to reach out to you. One of the benefits of simply retaining a bankruptcy attorney is that your creditors will now be required to contact your attorney and by law must stop contacting you or face possible court sanctions.

You are not required to notify your creditors that you are planning to file bankruptcy; in fact, it may be in your best interest not to do so. However, there are a few exceptions to this rule, so it’s important to talk to an experienced bankruptcy attorney before making any decisions.

Here are some of the cons of giving creditors information about your financial situation and a possible bankruptcy process.

Potential adverse effects of notifying your creditors

No assurance threatening to file bankruptcy will deter creditors from calling you. The only surefire way to prevent this is actually to hire a bankruptcy attorney. Once you file the bankruptcy case with your attorney the “automatic stay” (i.e., the bankruptcy protection) comes into play, effectively freezing any attempts by your creditors to collect money owed.

Creditors are aware of the potential consequences of committing a violation and usually cease taking any further collection efforts. You should be careful to inform a creditor of your bankruptcy intentions because the creditor may intensify its efforts to get money out of you before it’s too late. Finally, no one knows what the creditor will do next, such as filing a lawsuit against you.

Yet beware of unfair debt collection!

The Fair Debt Collections Practices Act (FDCPA), a federal statute, prohibits debt collectors from using abusive methods to collect a debt.

Under the FDCPA once you simply retain an attorney to assist you with your debt obligations, then the creditor must only contact your attorney representative to discuss or resolve the debt. It also sets boundaries for creditors to prevent them from calling you in the middle of the night or from calling you an unreasonable amount of times.

Harassment from a debt collector is never OK. If you are scared, write to the firm and request that they cease calling you. If you ask them to stop contacting you, they are required by the FDCPA to comply.

How to stop phone calls and creditor harassment

A debt collector is limited by federal law from employing any deceptive, fraudulent, or misleading means to collect a debt. For example, misrepresentations about the debt are illegal under this legislation.

If you sue under this federal law and win, the debt collector will usually have to pay your attorney’s fees as well as damages. Of course, in this case, they can no longer contact you with any more collection calls.

Negotiate down the debt by working with the secured creditor or lender

If you owe money and manage your creditors yourself rather than employing a for-profit debt settlement firm, you may save a lot of money.

After you’ve decided to pay a debt, it’s time to figure out what you can afford. Take a good look at your finances.

Negotiating a settlement

Set a firm stance with certain creditors when you go to the bargaining table. Debt collectors and creditors are not allowed to threaten you with arrest or state that you will be arrested if you don’t pay your debt.

Be wary of the particular creditor that claims to be government contractors or subcontractors for government agencies like the IRS.

Some debtors consider that hiring a bankruptcy lawyer is a good idea for this negotiation. Since most bankruptcy attorneys know the ins and outs of the bankruptcy code and offer a free consultation, a debtor may visit them to decide if a bankruptcy attorney can be of assistance.

Advantages of settling a debt with a law firm

If you go to a free consultation with a lawyer, even before you talk about filing for bankruptcy, you can ask for assistance and discuss how to settle your debt. The main advantage of doing this is that you can get honest and accurate legal advice.

A bankruptcy attorney also might be able to get a lower settlement amount from the creditor than you could on your own because they are familiar with the law, have likely settled similar debts in the past, and creditors recognize that filing for bankruptcy is a legitimate possibility.

Working with a bankruptcy attorney provides you with protection from unlawful debt collection tactics, as well as confirmation that the calls and harassment will cease.

The attorney-client relationship has other great advantages like forming a solid strategy and providing an overview of all the options available to you.

How to hire a bankruptcy attorney for a bankruptcy filing to stop collection activities

You can find bankruptcy attorneys through online directories, word of mouth, or by contacting your state’s bar association. Once you have a list of potential candidates, set up consultations to get more information about their experience and fees.

Talk with the bankruptcy lawyer about the possibility and benefits of filing bankruptcy and what bankruptcy plans you have in mind. Yet keep open to the possibility that the attorney can suggest not going to bankruptcy court as the best solution.

Filing for bankruptcy to stop contact with a creditor

With a Chapter 7 bankruptcy filing, an automatic stay immediately goes into effect. The stay is a court order that stops all collections, including calls and letters, from the moment you file your case.

Yet bear in mind that according to bankruptcy laws, a creditor is not allowed to contact you directly or take any action to collect a debt once you get a case number. You will be assigned a case number when your bankruptcy petition is filed in bankruptcy court.

Proceedings will not always stop creditors

Some debtors mistakenly believe that simply informing the lender that a claim will be filed is enough to deter them from pursuing collection efforts.

Bankruptcy proceedings will not necessarily stop creditors from taking legal action against you. In some cases, your creditors may request that the court allow them to “lift the automatic stay.” If this happens, your creditors will be able to continue with any legal action that was already underway against you before you filed for bankruptcy.

Collection agencies will not care about bankruptcy protection until you get your case number and your creditor will probably continue to call you until they receive notice of your bankruptcy number.

The best method to notify your creditors you file bankruptcy

The Bankruptcy Court informs your creditors about your bankruptcy case once it is filed.  Bankruptcy cases are filed through an electronic filing system called ECF or pacer.  

This allows cases to be filed from anywhere at any time of day. The most common method for debt collectors to learn about bankruptcy filing is through a letter from the United States Bankruptcy Court Clerk.

The law requires that creditors on your bankruptcy schedules are notified of the filing. The B-9A is a type of letter in which all sorts of intricate information about the filing may be found.

What is a B-9A letter?

This letter includes:

  • Debtor’s name
  • Address
  • Social Security number
  • Client’s attorneys
  • Location and phone number of the office
  • Case number
  • Jurisdiction
  • Trustee
  • Date, time, and location of the Meeting of Creditors

A B-9A letter will be sent to all creditors listed on your bankruptcy schedules. The letter will provide information about the meeting of creditors, also known as the 341 Meeting.

All you have to do is wait for the notification from the court that your creditor has been receipt of the B-9A form.

In conclusion, remember that while an attorney can help you with your bankruptcy filing, the hiring of a law firm has no legal significance for creditors. The most important thing is that the court sends out notifications to all of your creditors about your bankruptcy case. Once they have received this notification, they are legally required to cease all collection efforts.

How long does it take for creditors to be notified of bankruptcy?

Creditors are notified within three to five days of you filing bankruptcy. This happens via mail, as part of a notice of what’s called the first meeting of creditors. This typically occurs 20 to 40 days after your bankruptcy petition has been filed.

How do creditors know I filed bankruptcies?

Creditors will know that you filed a bankruptcy because the court is required to notify them. The clerk’s office will mail a notice to all creditors that you have filed for bankruptcy.