I filed bankruptcy. Why are they after me?

Justin HarelikDear Bankruptcy Adviser,
I filed bankruptcy in 2007, including a bank account, which I had closed. I instructed the bank not to pay any more automatic deductions because I was filing bankruptcy, and I closed the account. The bank then honored a few direct debits after I closed the account. That did not seem right, but I just decided to include the account in my bankruptcy. Five years later, I get a statement from a collection agency requesting partial balance as full payment. The notice said I will have to pay the whole thing if I do not pay now. This account was included in my bankruptcy. How do I get them to stop harassing me?
-- Theresa

Dear Theresa,
I am confident this letter from a collection agency does not rise to the level of harassment. A nuisance maybe, but harassment would require a little more aggressive collection activity than just a letter. You've encountered a very common post-bankruptcy occurrence that can be handled quickly and easily.

Your sort of situation happens when the creditor does not properly cancel out the account. When the debits were posted and you failed to pay the bank for the overdraft amount, the bank tried to collect, then eventually decided to "write off" or "charge off" the balance. The debt did not disappear. Instead, it entered the amorphous world of collection accounts.

In most cases, the bank has one specific collection agency that takes over its bad debt. The bank usually just assigns the account for collection, and the collection agency sends you a letter demanding payment. This entity has a legal right to sue you for the balance. When you file for bankruptcy, the bank will notify the collection agency that you filed and that the debt was included.

In other cases, the debt is purchased by a debt collection company. That company pays pennies on the dollar for the debt with the goal of collecting some of the outstanding balance, though it has the right to collect the full amount owed. Had you not filed for bankruptcy, you would either have to pay the balance in full or settle with the debt collection company.

This is the type of company that probably sent the letter because it did not receive notification of your bankruptcy. Since you did file for bankruptcy and say you listed the original account in the creditor list, you are in the clear. The bank received bankruptcy notification and did not properly notify its collection agency. The debt was then sold to the company that is now trying to collect.

At this point, you need to contact the collection company directly. You will need to provide your bankruptcy case number, date you filed and date the case was discharged. In some cases, you will need to send proof that the debt was included in your bankruptcy paperwork.

This will resolve the matter. If the collection company does not accept your evidence, then you have a great case against the company for violation of the bankruptcy code.

Ask the adviser

To ask a question of the Bankruptcy Adviser, go to the "Ask the Experts" page and select "Bankruptcy" as the topic. Read more Bankruptcy Adviser columns and more stories about debt management.

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