The bankruptcy court doesn’t send you mail unless it’s important.
Sometimes creditors just can’t help themselves from running afoul of the bankruptcy laws.
My client owed $78 to her dermatologist. She had a host of other overdue debts that led her to my office and, after realizing she was over $50,000 in the red she decided to file for bankruptcy.
The Chapter 7 case went smoothly, and she got her discharge about four months after filing.
From there, she went about her business.
Unfortunately, so did the dermatologist.
Collections Ramped Up After The Bankruptcy
After the bankruptcy, the dermatologist continued to send collection letters. My client figured it was a mistake, so she didn’t make a big deal of it.
A few months later, she got served with a lawsuit demanding $575 – $78 for the original bill plus collection costs and finance charges for nonpayment.
This Was A Problem
Under the U.S. Bankruptcy Code, all collection efforts must stop once the case is filed. That’s a temporary solution which is made permanent by the discharge order.
In other words, the collection efforts were illegal. My client didn’t make any noise about it, but once things turned ugly and legal action was commenced, she’d had enough.
By the way, the doctor’s collection agency had been reporting the debt as past due on her credit report as well. Had she checked her reports before the lawsuit was started, she would have known that as well. Also illegal, by the way.
So We Sued The Doctor
When you’ve got a creditor who takes illegal action against you, there’s no real way to protect your rights but to sue. That’s exactly what we did.
As an aside, when we sue for a violation of the bankruptcy court’s discharge order we do so without any upfront fee from our client. Instead, we are compensated at the end of the case by receiving a portion of any money damage award or settlement. So we don’t take these cases lightly – it’s got to have a reasonable chance of success for us to take action.
A Defense Of Stupidity
We served the lawsuit on the doctor, and he didn’t answer it. In fact, it wasn’t until the judge called him into court for contempt did he bother paying attention.
The doctor’s attorneys confirmed that they’d received the bankruptcy court notices but tossed them out. The notices, they thought, somehow didn’t apply to them.
In court, the doctor told the judge he thought his bill wasn’t covered by the bankruptcy because he was outraged that my client would dare to file for bankruptcy in the first place.
As to the reason why he didn’t answer the lawsuit we filed against him? He claimed that it was a bogus lawsuit that wasn’t worth his time or energy.
This Ended Badly For The Doctor
In ruling in my client’s favor, the judge ordered the doctor to pay the following:
- $10,000 to my client; and
- $10,000 to me for legal fees.
This served to underscore to the doctor that bankruptcy court is not an entity to be ignored.
Your Lesson For The Day
The bankruptcy court is a real place – with real powers. When you’re told to do something by the court, you do it.
If you disagree, you respond appropriately.
If you ignore the court, you will lose.
Whether you’re filing for bankruptcy or are a creditor in a bankruptcy case, the rules are the same.