Pet Peeve Number 7

DON’T CALL YOUR CREDITORS AND TELL THEM YOU ARE GOING BANKRUPT!

Over 35 plus years of practice, I have found that debtors in bankruptcy are almost universally people who feel embarrassed, upset, ashamed, and guilty.  But a very small percentage are so driven by one or more of these emotions that they do a completely stupid thing; they call up all their creditors and tell them they are going bankrupt.

Whether the debtor is seeking forgiveness, absolution, or just thinks that being the bearer of this bad news is “the stand up thing to do,” this is a completely self-destructive act.  It can serve to complicate a bankruptcy case way beyond the limits of a fixed fee standard consumer case.  The reason is quite simple, but not readily apparent.

Creditors, particularly secured creditors (homes, cars, etc.) have a right to reasonable assurance that the debtor is able to pay and that the collateral is secure.  The filing of a bankruptcy creates an automatic stay, an injunction, against creditors taking any action against a debtor.  So if the first time a creditor knows you are filing bankruptcy is when they receive notice from the court, there is nothing they can do about it.  But, if a debtor warns them, tells them in advance, they can use this information to justify everything from a pre-judgment attachment, to a garnishment, to a repossession.  While all of these can usually be undone by a quickly filed bankruptcy, it is more expensive and the arguments about legal significance are much less certain to produce results.  Moreover, no one likes to come out of the house and find an empty parking space.

So, if your bankruptcy lawyer doesn’t happen to mention it, or if you think that threatening creditors with your own bankruptcy will bring a positive result, DON’T DO IT.  You will likely do more harm than good.

This article is written by an attorney at Wyatt & Mirabella, PC. Always consult an attorney before making any legal decisions. To make an appointment today for a free consultation, please click here to contact us.