6 Essential Bankruptcy Compliance Strategies for Collection Agencies
Collection agencies ensure compliance with bankruptcy laws by adhering to the following guidelines:
Understanding the Automatic Stay
- Upon a bankruptcy filing, an automatic stay goes into effect, prohibiting most collection activities, including phone calls, lawsuits, and wage garnishments. 12
- Agencies must immediately cease collection efforts on debts included in the bankruptcy case.
Compliance with FDCPA
- Collection agencies must comply with the Fair Debt Collection Practices Act (FDCPA), which prohibits abusive and deceptive collection tactics. 2
- This includes not contacting the debtor directly if they are represented by an attorney in the bankruptcy case. 3
Verification of Bankruptcy Status
- Agencies must verify the bankruptcy status of a debtor before proceeding with any collection activities.
- This includes checking if the debt is listed in the bankruptcy petition and if the automatic stay applies. 1
Post-Discharge Compliance
- Once a debt is discharged in bankruptcy, collection agencies are permanently barred from collecting on that debt. 34
- This includes not selling discharged debts or reporting them to credit bureaus in a way that suggests they are still collectible. 4
Legal Representation
- Collection agencies may benefit from legal representation to navigate the bankruptcy process, especially in cases where they need to file motions or adversary proceedings to protect their interests. 5
Use of Technology
- Some collection agencies use specialized software to track bankruptcy information and ensure compliance with bankruptcy laws, such as automatically tagging accounts that are in bankruptcy and guiding agents through complex processes. 4