What to Tell Creditors When Filing Bankruptcy

What to Tell Creditors When Filing Bankruptcy? 3 Important Steps

In this article, we’ll answer the important subject matter of, “What to Tell Creditors When Filing Bankruptcy?”

Usually, many questions arise when you are trying to file a lawsuit of bankruptcy as you are trying to figure out the best possible way to overcome this situation and inform the creditors. 

Should I inform my creditor that I’m going to file bankruptcy?

Will I stop receiving calls post that?

If I inform him about the situation, will it affect the creditor?

Is he going to negotiate the terms before filing a case?

Creditors are those stakeholders who do try their best to get back the loan that they have given you, by any means possible. At times, it isn’t easy to listen to everything that the creditor has to say. So, let us find out what is the technically correct way of informing the creditors. 

What to Tell Creditors When Filing Bankruptcy?

When does anyone file for bankruptcy? When the debt is more than assets and income. And when you are in such a difficult situation, it is often very common for the creditor to call repeatedly.

As per the mentioned rules of bankruptcy, there is no need to inform the creditors you are about to take this step. But a few people do it out of courtesy. Most people often do it to stop the constant calls that they receive from creditors. There is a proper format to give notice to the creditors, and you will be pleased to know it is not you who informs but your attorney or the court. 

A few scenarios explain the reason to inform the creditor that you no longer have money to repay the debt. People use this tool to negotiate terms and bargain their way out of the debt. 

Firstly, people take this step to make the calls from disturbing them. Creditors are well aware that there will be an automatic stay on debt collection or any communication directly with the person once there is a case filed. From then on, all kinds of communication will happen through the attorney.

When creditors hear about the threat to bankruptcy, they try to pursue more to get the amount back. It depends on the creditor on how they will react. In a few situations, they can agree to revise and settle at a lower debt rate. This article lets us find out what can be communicated to the creditors during the entire bankruptcy procedure. 

Communication with creditors in phases

The situation arises when you have decided to file a bankruptcy case as you are annoyed with the creditor’s constant reminders. There can be 3 phases when the creditor calls, and you need to know what exactly to tell them.

●     Before filing the case

Way before you file a case, you can speak to the creditor to determine if they can negotiate terms of debt and repayment. If it comes to an understanding, you will be spared to filing a case of bankruptcy. And if not, you can inform them to communicate further details with your attorney.

●     During the case

Once the case is submitted in court, there is a stay order on all kinds of debt collections. The bankruptcy notice will be communicated to the creditors through the bank, and you don’t have to communicate with them at this stage. If you still receive calls and reminders, you can tell them to contact your attorney and settle. Your lawyer can sue them for contempt of court, which can charge them a fine too. 

●     After the case is discharged

Once the debts are discharged, the creditors have no right to call and collect the same debts. The federal court of bankruptcy stops creditors from doing so. You can again ask them to communicate with your lawyer if you receive repeated calls. However, in case of a few non-dischargeable debts, you may receive phone calls, and you will have to keep paying the bills. 

Can a creditor collect on a discharged debt?

In simple words, the answer is no. When a bankruptcy is discharged, it stops a permanent collection of that debt. Despite the court’s orders, a few creditors try to pursue you to collect the debts back. There can be phone calls and letters, and it is not legal. If it feels like harassment, you can always let your attorney know and let him legally take care of it. 

But before that, make sure you have the list of debts laid out and discuss with your attorney to understand which debts are to be considered and which not. As there can be a few debts that are not dischargeable, and there can be calls for those. For instance, if you have a child support loan, alimony, domestic support, or government-backed student loan, you are under challenging situations.

Summary

Before we jump to any conclusion, let’s know for sure that creditors, in a few cases, do exercise power. And it is not confirmed that after you file a claim, you will be spared of their constant reminders. You can always consult with your attorney to better communicate the situation and take any legal step if required. But make sure you have the bankruptcy notice well communicated to your creditors. 

Video

If you still need to know more information on “What to Tell Creditors When Filing Bankruptcy?”, check out this short explanation video below:

Discolsure: I am not a financial expert and it is highly recommended that you seek out a professional before making any financial decisions. Articles are informational and for educational purposes only.

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