It is not a Good Idea to Tell a Creditor About Filing Bankruptcy Notes Iowa Bankruptcy Lawyer
Des Moines, IA (Law Firm Newswire) March 14, 2012 – Some debtors immediately tell their creditors they are declaring bankruptcy. This is not always a wise move.
It is very tempting to tell a persistent and irritating creditor that there is a bankruptcy pending to stop them from having any further contact about an outstanding debt. However, it is not always a wise idea to share that kind of information with creditor noted Kevin Ahrenholz, a Waterloo bankruptcy lawyer. Warning the creditor can backfire, and since debtors do not have any protection until they file, it is best they wait until they do.
It is difficult to know what to tell creditors when they are calling at all hours of the day wanting to collect their due. However, if a debtor has not yet filed, what do they tell a creditor before filing or after they have filed? When a bankruptcy is filed, there is an automatic stay that goes into effect immediately. A judge specifically orders all collections activity to stop, which is a feature referred to as an automatic stay. This stay goes into effect for all bankruptcy filings and halts proceedings such as debt collection harassment, repossessions, evictions, garnishments, utility shut-offs, foreclosures and some lawsuits.
There are two schools of thought on what to tell a creditor about bankruptcy proceedings. Many lawyers feel that until an individual does files for protection, the debtor should not say anything. This is because the creditor may hurry their claim against the debtor, and file a lawsuit to get judgment. Some collections agencies may even write up a petition to challenge the automatic stay, which is a move that could make a bankruptcy proceeding even more complicated and expensive, Ahrenholz noted.
Other bankruptcy lawyers suggest their clients tell creditors they are going to file, as this may stop some of them from calling. Even though a creditor that has been warned of a pending bankruptcy may get judgment against the creditor, the judgment may be stopped in its tracks or removed with a successful bankruptcy.
There are other ways to get creditors to stop calling, and another one of them is to send the collection agency a cease and desist letter based on the Fair Debt Collections Practices Act. Once that happens, Ahrenholz explained, the collections activity must, by law, stop. Despite the two opposing points of view, telling a creditor too soon may work out to be a Catch 22. Never do that without first speaking to a competent Iowa bankruptcy lawyer to get their take on the problem.
Kevin Ahrenholz is an Iowa bankruptcy lawyer and Iowa bankruptcy attorney. To contact an Iowa bankruptcy attorney, Iowa bankruptcy lawyer, or set up an appointment, visit http://www.iowachapter7.com or call 1.877.888.1766.
309 Court Ave., Suite 805
Des Moines, IA 50309
Offices in Des Moines, Cedar Rapids, Waterloo, Mason City, and Vinton.
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