Know your rights in bankruptcy

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Dear Bankruptcy Adviser,
I filed for Chapter 7 in 2002 and was discharged in 2003. My credit reports reflected “collection/charge-off” accounts with a “balance.” I cross-checked my discharge notice and found those items were not included in the bankruptcy filing. Am I doomed now? Can I hold the bankruptcy lawyer responsible due to his negligence after all these years? Please advise.
— Anita

Dear Anita,
I know most people will roll their eyes at this, but I don’t know what your bankruptcy attorney did wrong. Unless you asked the attorney to pull a credit report, you are the only one responsible to inform the attorney of all debts owed. Just because you used an attorney does not mean that he or she had more access to your accounts than you did.

Now, this does not mean you are automatically “doomed.” Depending on the state you live in, the debts may all have been eliminated even though you failed to list the account.

First, you need to know your rights specific to your state. In California and all states that are under the jurisdiction of the United States 9th Circuit, the controlling law is that even if you failed to list a debt in your bankruptcy schedule of debts, the debt is still eliminated. Therefore, a debt collector cannot legally collect debts that had been incurred prior to the bankruptcy filing. Failing to list the debt does not mean you did not eliminate it.

Second, debt collectors lie. This is not news, but it is very common for a collector to say, “Sorry, you did not include this account in your bankruptcy, therefore, you must still pay it.” If you do not know the laws regarding bankruptcy in your particular state, then you might believe the collector. Even worse, you could make a payment to the collector only to find out that your state law protects you.

The debt collector may have the audacity to sue you for the debt before or after you have made a payment and therefore claim that you “reaffirmed” the debt, meaning, you agreed that even though the debt was eliminated in your bankruptcy, you personally wanted to pay back the money borrowed. As a result, the collector could get a judgment against you that legally is not enforceable. Because you do not know your rights, you believe the judgment to be valid. Judges are not responsible to determine whether your debt was or was not eliminated in bankruptcy. You will have to make the judge aware through the appropriate means that you filed bankruptcy and your state does not allow collecting on that debt after you received your bankruptcy discharge and your case was closed.

It seems you are dealing with a possible violation of bankruptcy laws as well as the federal Fair Debt Collection Practices Act, or FDCPA. There are attorneys who handle FDCPA litigation, but they might be difficult to find in your state. Usually the attorney handles these issues on contingency — meaning you do not have to pay anything upfront. However, because any attorney is working on your case for free with the hopes of getting money out of the collection agency, very few attorneys handle this type of case.

Justin Harelik is a practicing attorney in Los Angeles. To ask a question of the Bankruptcy Adviser go to the “Ask the Experts” page, and select “bankruptcy” as the topic.