subject: The Connection Between Bankruptcy and Collection Agencies [print this page] The Connection Between Bankruptcy and Collection Agencies
When you are in the midst of financial problems and begin to fall falling behind in your utility payments, automobile payments, and your rent or mortgage payments, it does not take too long before your creditors begin to call you asking you to pay your overdue bills. If you still don't pay, your account is eventually turned over to a collection company whose purpose is to harass you into paying your debts.
For those who are sick of the seemingly never ending phone calls and dunning letters, some consumers consider bankruptcy as a viable alternative out of their debt difficulties. Bankruptcy has a number of advantages.
But, even though bankruptcy provides you with a lot of advantages, for the most people, the most significant is that once you make the filing, nearly all creditors and collection agencies are required by law to cease and desist all attempts to collect a debt from you.
It doesn't matter whether the debt balances are from department store credit cards, overdue medical bills, house utility bills, and the like. Every one of these creditors cannot contact you in regards to your debt. These creditors also cannot file any lawsuits against you, try to put negative marks on your credit report, or file liens against any property that you may own. Once you file, if your creditors want to get any monies from you, they have to show up at your court hearing and make their case.
Some classes of debt, however, are not restricted to the normal bankruptcy rules. For example, more than likely you will still be responsible for debts such as federal and state taxes and child or spouse support. You will have to consult your state laws to identify your remaining liabilities following bankruptcy.
In addition, under certain conditions, if you are a renter and the landlords have already sued you and obtained an eviction judgment against you, you will not be protected from eviction.
But, even taking these exceptions into account, bankruptcies offer so many other advantages to those in debt that it is something that you have to consider. In fact, this is exactly the reason why the number of bankruptcies filed has increased by about 35% for each of the last two years.
So the fact that collection agencies aren't exactly in love with bankruptcy laws should be no surprise. For the most part, these companies work on a commission based on the amount of monies they are able to collect from the debtors. If the debtor files for bankruptcy, most of their debts, including the ones that the collection agency is trying to collect on, will be wiped out. Not to mention the fact that they can no longer even communicate with the debtor to harass him into paying.
