Lies Creditors Tell

Lots of people will tell you things about bankruptcy. Some of those people just want to give you information — they mean well, but they don’t always know the facts. This category includes your family, friends, lawyers who don’t keep up with bankruptcy law, and most honest creditors and debt collectors.

Others, including sleazy creditors and debt collectors, are nothing but vicious liars and crooks.

Some dirty debt collection tricks that have been tried on our clients:

  • Collector went to our client’s house at midnight, dressed as a policeman, showed a fake badge and tried to get money.
  • Collector called a client’s mother and said her son would be arrested unless she did a “check by phone” for the full amount of the son’s debt.
  • Creditor told a client whose bankruptcy case had been filed that the court had no record of the case, and the creditor was going to come to the client’s house and take her furniture to satisfy the debt.
  • Creditor told a client that the creditor had called our office, and that we said it was OK for the creditor to call the client as much as the creditor wanted.
  • A payday loan creditor told our client that she had signed a paper swearing she would not put the payday loan in the client’s bankruptcy.
  • A collector told our client that Congress had done away with bankruptcy, altogether.
  • Collector suggested that a client pay the debt by working as a prostitute.
  • Creditors and collectors told clients that “they will never get credit again” after bankruptcy; they will lose public benefits; they will be fired; the bankruptcy will go on their child’s credit records; everyone will know that the client is a “deadbeat;” not paying the debt is the same as stealing.

Other lies creditors have told our clients

Everyone will know!

Almost no one will know that you filed bankruptcy, unless you tell them, or it is their legal business to know. Creditors will know, but your boss, your bank, your neighbors, or the police will not know unless you owe them money.

You don’t make enough money to file bankruptcy.

Of course you make enough money to file for bankruptcy protection! There is no “minimum earnings” test. So, your creditor is saying that people with no income can’t get relief from their debts? If they can’t, then who in the world CAN?

You don’t have enough debt to file bankruptcy.

Not true! While it may not make economic sense to declare bankruptcy when you have very little debt, it is certainly legal. If you have any debt that you haven’t the means to pay, and you are otherwise eligible for bankruptcy relief, you can file a petition for bankruptcy relief.

You can’t discharge (get rid of) this type of debt.

There are only a few types of debt that you CAN’T get rid of in bankruptcy: most taxes, child support, alimony, fines or fees that you owe to a court, etc.

BUT, most debt is dis-chargeable, including credit card debt, home and auto loans (if you let the house/car go back to the creditor), medical debt, payday loans, finance company loans, old utility bills, whatever. If a creditor tells you anything about bankruptcy, check it out with a bankruptcy lawyer!

We’ll have you arrested if you don’t pay.

Remember your American History and Civics classes? Even if you were almost asleep, you probably caught some of the stuff about debtors prison. Remember? The Continental Congress made it clear that, unlike King George’s England, the United States would NOT have debtor’s prisons. YOU CAN’T GO TO JAIL FOR NOT PAYING YOUR DEBTS. If a creditor tells you that you will be arrested. Tell them to go ahead and call the police. If someone who looks like a policeman comes to your house and threatens to arrest you for not paying a debt: don’t give him any money, AND, have him arrested for impersonating an officer!

We can call you as many times a day as we want.

Not unless they want to be sued for violating federal law and/or state telephone harassment statutes! If the caller is collecting another person’s debt, he has to follow the Fair Debt Collection Practices Act (FDCPA), which prohibits a debt collector from engaging in any conduct, which, intended or not, harasses, oppresses or abuses any person in connection with debt collection. If you think the creditor is harassing you, start writing down the number of calls per day, and the time of day at which the calls are made. You may have a harassment case under both state and federal law.

We’ll seize your bank accounts.

Prove that you are smarter: tell them to go ahead. The fact is, they cannot seize your accounts unless they have already sued you in court and have a judgment against you. Even then they will have to request that the court issue a Writ of Garnishment, and have the Sheriff serve it on the bank.

EXCEPTIONS to this rule:

  1. If you owe the money to the bank in which you have your accounts, that bank can exercise its “right to set off” and seize your money.
  2. The IRS can place a lien against your bank account, and seize your money if you owe unpaid taxes.

If you don’t pay us today we will garnish your wages for the full amount, starting this week.

Same answer as above, except that a bank cannot exercise its “right to set off” until your wages are deposited into the bank. In order to garnish your paycheck, creditors must sue you, take judgment, and get a court order allowing them to go ahead with the garnishment.

I filed bankruptcy, and this is how it works…

Unfortunately, not every bankruptcy case is alike. If they were, it would be a lot easier on the attorney! Someone who has filed bankruptcy, before, knows what happened in his case, but may not know WHY it happened that way. He really doesn’t know everything to know about bankruptcy — he just knows what he remembers — or thinks he remembers.

Unless your neighbor’s situation is exactly like yours, and his case was filed in the same district of the same state that yours will be filed in, and he filed under the same version of the bankruptcy code that you will file under, and he constantly reads and keeps up with court interpretations of bankruptcy law, his bankruptcy experience will not be a good guide to bankruptcy. Bankruptcy laws change, court interpretations of the law change, and trustee requirements change. Only an experienced bankruptcy attorney will know the current law, and how it applies to you.

We’ll seize your tax refunds

Gee, they must work overtime to think this stuff up! No they won’t seize your tax refunds!! Not even with a judgment and a court order — unless you deposit your tax refund into your bank account. Then they can get, but only if they have an order allowing them to garnish the funds, or you owe money to the bank.

EXCEPTIONS to this rule:

  1. If you owe the money to the federal government, or for federally-backed student loans, the IRS can seize your FEDERAL tax refund.
  2. If you owe money to your state government, owe unpaid state taxes, or have past due child support, your state can seize your STATE tax refund (this is true in Missouri and most states, but check your state laws to be sure).