Fighting Aggressive Collection That Forces Debtors Into Bankruptcy

A preferential debt payment is often made to a creditor 90 days prior to a debtor filing for bankruptcy. The creditor can obtain more money than they would normally receive during the debtor’s bankruptcy case. If the debtor owes the money to a relative, the 90-day period is extended to a full year. However, the bankruptcy laws allow a trustee assigned to a case the right to demand the return of any preferential debt payments. This is known as the “clawback provision” in bankruptcy law. When people wind up with heavy credit card

Forced Into Involuntary Bankruptcy

The United States Bankruptcy allows creditors to file an involuntary bankruptcy action against debtors. This petition can be brought only under a Chapter 7 liquidation bankruptcy or a Chapter 11 reorganization bankruptcy. Certain groups are exempt from this action:

Farmers
Non-Profit Groups
Banks
Insurance Companies
Credit Unions
Savings and Loan Institutions
Railroads cannot be debtors in Chapter 7
Stockbrokers and commodities brokers cannot be debtors in Chapter 11

Three creditors who have unsecured claims totaling at least $10,000 may file an involuntary petition against a debtor. A single creditor that has claim of at least $10,000 can initiate the petition, only if the debtor has less than 12 unsecured creditors. There are two grounds that must be met:

The debtor is not paying their debts when they become due, unless there is a dispute as to the amount or liability.
Within 120 day prior to the filing, a custodian or assignee has taken possession of the debtor’s property in order to enforce a lien.

Creditors may wish to file an involuntary bankruptcy petition to compel distribution of the debtor’s assets. When a business owner sells off the company’s assets without paying their debts, the creditors can seek an involuntary petition against them.

How to Fight Back

Aggressive collection practices can involve having your wages garnished or your bank accounts and assets levied. You may even be facing a lawsuit for not paying your credit cards, student loans or medical bills. Collection agencies often go after victims who are ignorant of the laws. The Fair Debt Collection Practices Act was passed to stop abusive conduct by collection agencies. Some restrictions include:

Contacting a third party, such as a relative, who is not responsible for the debt
Threatening you or using obscene language
Repeatedly calling at unreasonable times, which is before 8 am or after 9 pm
Calling you at work if you have asked them no to do so
Threatening you with physical harm or saying they will have you arrested

When people are informed about their rights, they can fight back by doing the following:

Inform the collection agency in writing to stop contacting you and send this via certified mail so that you have proof.
Dispute the debt and request proof that you are the one who owes the debt.
Each state limits the amount of time a debt collector has when enforcing a debt. Check the statute of limitations in your state.

How a Lawyer Can Help

If a collection violates the Fair Debt Collection Practices Act, you can sue them in state or federal court. You must bring this action within a year of the date of violation; therefore it is important to seek legal help right away. An experienced attorney could help you recover any losses you suffered as a result of their actions.

Think Bankruptcy Might Be for You?