If you filed a Chapter 7 bankruptcy and surrendered your home, the debt tied to that property should be discharged. That means creditors cannot legally come after you for the balance once the home is sold at sheriff sale. Yet, some creditors still try to collect. What happens then?
How the Law Protects You
Under 11 USC § 524 (a)(2), a bankruptcy discharge acts as a court order. It stops creditors from trying to collect debts that were included in your bankruptcy. If a creditor keeps pursuing you, they may be violating federal law.
Attorney Steven Taieb once represented a woman from Willingboro, NJ, who surrendered her home in Chapter 13. Even after her discharge, the mortgage company harassed her. Once the court was notified, she received compensation for damages.
What the Supreme Court Says
In Taggart v. Lorenzen (2019), the U.S. Supreme Court made an important ruling. The Court said:
A creditor can be punished for contempt if there is no reasonable basis to believe their actions were legal under a discharge order.
Creditors cannot simply claim they acted in “good faith” if that belief is unreasonable. Otherwise, debtors would be forced back into court to fight battles that should have ended with the bankruptcy.
However, the Court also rejected a strict liability approach. Not every mistake by a creditor will automatically result in sanctions.
What This Means for You
If a creditor is still trying to collect after your bankruptcy discharge:
You may have legal grounds to bring the matter before the Bankruptcy Court.
The Court can impose civil contempt sanctions on the creditor.
You do not have to tolerate harassment or unfair collection attempts.
Get Legal Help Today
If you believe a creditor violated your bankruptcy discharge, you have rights. Contact TAIEBLAW at 856-235-4994 or visit TAIEBLAW.COM to discuss your situation.
Steven N. Taieb, Esq. has been a South Jersey Bankruptcy Attorney for more than 34 years. He is board certified in consumer bankruptcy law by the American Board of Certification, accredited by the American Bar Association.
