Will Bankruptcy Stop a Credit Card Lawsuit?

Bankruptcy Attorney St. Petersburg Florida

These days, it is crucial to possess at least one credit card. Try renting a car without one. If used properly, credit cards can be a very valuable tool. Some credit cards carry “rewards programs” that bring with them some pretty useful benefits. For example, if you use your credit card for everyday living expenses, and then pay it off in full each month (so as to not incur any interest charges), you can earn enough “points” to go on a vacation every year. There are many advantages to properly using a credit card. In a perfect world, we would use our credit cards wisely, reap tremendous benefits, and nothing bad would ever happen to us. Doesn’t that sound nice?

As you are no doubt aware, we do not live in a perfect world. “Life” gets in the way of even our best plans. Be it injury or illness, marital problems, job loss, or poor financial planning, there are all kinds of reasons that could lead someone to seek legal advice from someone like myself. Let’s look at an example of where someone started out with good intentions, but unforeseen circumstances led them to a credit card nightmare:

“Mr. G” had very good credit. So good, in fact, that a major credit card company (we’ll call them “Bank of USA”) offered Mr. G a pretty good deal. If Mr. G put at least $5,000.00 on his new Bank of USA credit card in the first 90 days after activating the card, Bank of USA would give Mr. G 50,000 “points” that Mr. G could use for travel (airfare, hotels, car rental, etc…). They also gave him a pretty low-interest rate, so even if Mr. G didn’t pay off his balance each month, he wouldn’t have to pay very much in interest. Mr. G had a pretty well-paying job in St. Petersburg, Florida, and lived a pretty stable life. He quickly realized that the more put on his Bank of USA credit card, the more points he would receive. Mr. G was planning a fishing trip in Costa Rica at the end of the year, and his goal was to pay for the trip using only credit card points. In a matter of six months, Mr. G had incurred credit card charges of $50,000.00. Normally he liked to pay off his balance every month, but with Christmas coming, he figured he would just make a few minimum payments so he could free up some money for presents for his family. That’s when things took a turn.

Mr. G was fishing on the beach one day when he stepped on a piece of glass, slicing open his foot. It hurt a bit but didn’t seem like a big deal. In the days to come, he realized that his foot was infected. The doctor told him that he had contracted a rare blood disease. Mr. G’s health quickly deteriorated. The doctors told him that he would have to stay in the hospital for a prolonged period of time. After using up all of his allotted “sick time” at work, his job told him they couldn’t keep him employed and had to replace him. Suddenly Mr. G found himself unemployed, hospitalized for a long period of time, and all of his money was going to co-payments, deductibles, and other unforeseen expenditures. The very last thing on Mr. G’s mind and the lowest priority for Mr. G at that moment was his sizable credit card bill with Bank of USA.

Mr. G had to skip a payment. As almost all banks will do as soon as a payment is missed, Bank of USA raised Mr. G’s interest rate on the card from the low percentage rate to more than 20 percent. The minimum payments skyrocketed and now it was impossible for Mr. G to catch up, especially with no income. After a few more missed payments, Bank of USA turned the account over to a third party debt collector, who called Mr. G repeatedly. Once the debt collector realized that Mr. G wasn’t going to pay them, they hired a lawyer and filed a lawsuit. It was at this point that Mr. G decided to contact a lawyer.

This example is not all that uncommon. One seemingly minor life event can lead to catastrophic consequences. So what are the options available to you if you are facing a lawsuit for missed credit card payments? Assuming there are no good legal defenses to the lawsuit (you actually do owe it), then filing for bankruptcy might be your best option.

The good news is that once you file for bankruptcy, an Automatic Stay goes into effect. Think of an Automatic Stay as a tool used to freeze any and all lawsuits pending against you. While an automatic stay is in place, the credit card company, or third party debt collector, is unable to prosecute their case against you. They are now subject to the protections afforded by the bankruptcy court. The vast majority of individuals filing for bankruptcy do so under what is known as Chapter 7 or Chapter 13. While these two different kinds of bankruptcy have differing advantages and consequences, BOTH Chapter 7 AND Chapter 13 will immediately freeze a credit card lawsuit with an Automatic Stay.

Keep in mind that consulting with a bankruptcy lawyer, paying a lawyer, giving the lawyer financial documents, or signing a bankruptcy petition, will NOT give you the protection you need. It is not until a bankruptcy petition is actually FILED with the bankruptcy court where you will receive an Automatic Stay. This distinction is very important. You will come across many bankruptcy lawyers in Saint Petersburg, and all over the state of Florida, that will offer you what seems to be very enticing “payment options.” Before agreeing to any such payment plan, be sure to find out exactly when the lawyer intends to file your bankruptcy. A credit card lawsuit will contain strict timing deadlines. If you let the case go too long, without filing the bankruptcy to stop it, you could face severe consequences, such as wage garnishment.

Don’t wait until it is too late. If you are facing a credit card lawsuit, or fear that one may be coming soon, the time to act is now. Contact the experienced lawyers at Berkowitz & Myer so you can learn how the bankruptcy laws might help you with your particular financial situation. No two clients are the same and no two situations are the same. We look at each individual client and their unique state of affairs, and we come up with a plan of attack to guide them through this difficult time. The best part is that there is no cost to you, the client, for your initial consultation. You can meet with a lawyer, find out how the laws can help you, and not pay anything. We look forward to hearing from you.—

Jesse D. Berkowitz, Esq.

Attorney at Law

Can A Creditor Contact Me After I File Bankruptcy?

Recently, clients have contacted me stating creditors listed in their bankruptcy have been contacting them via letters and phone calls. Clients are confused because they thought the purpose of filing bankruptcy was to eliminate the debt and to stop creditors from contacting them. Once a debtor files bankruptcy, creditors are put on notice that the debtor has filed bankruptcy. Practically speaking, creditors should then cease all communications with the debtor. This article will explain what happens if they continue contacting debtors.

What is the Law?

Under the FCCPA, a creditor is not allowed to contact a debtor and attempt to collect a debt if they have knowledge that the debtor is represented by an attorney. See Fla. Stat. 559.72(18). This can get tricky in the bankruptcy realm of things. For instance, post-bankruptcy, a creditor may not call the debtor and ask for payment, but if the debtor still has the creditor’s property, the creditor may ask the debtor for the property back. Thus, the purpose of the communication is extremely important.  In a recent case, a creditor was notified of the debtor’s bankruptcy and the attorney who was representing him for the bankruptcy, but still continued to attempt to collect the debt.  I was able to recover $1,000 for the debtor for this misconduct.

Another tricky situation arises if a debtor has a judgment pre-filing of a bankruptcy and is having their wages garnished. Once the bankruptcy is filed, the garnishment is frozen due to the court ordering an automatic stay, which was discussed in a previous blog. If a debtor does not own a home, they are allowed a “wild card exemption” in the amount of up to $4,000 to protect personal property.  See Osbourne v. Dumoulin (In re Dumoulin).  Whatever is not protected under the wild card exemption, and is not listed in the bankruptcy, is fair game for collection after discharge of the bankruptcy.  For instance, in a recent case, my client was having his wages garnished pre-filing of the bankruptcy.  However, he used up his whole wild card exemption, so he was unable to protect the rest of the garnished wages.  After his bankruptcy discharge, the creditor proceeded with the garnishment.  This was allowed because the garnished wages were not protected by the wild card exemption.

Moreover, the FCCPA prohibits creditors from attempting to collect a debt from a debtor if they know the debt is not legitimate. See Fla. Stat. 559.72(9). Once a debtor’s debt is discharged in bankruptcy, the debt is no longer legitimate. Thus, if the creditor attempts to collect the debt from a debtor after discharge, they are in violation of the statute.  In a recent case, one of my clients discharged a medical bill in their bankruptcy.  After the bankruptcy was complete, the creditor continued contacting my client attempting to collect the debt.  This was a violation of both Fla. Stat. 559.72(9) & (18) because the client did not owe the debt anymore, and the creditor should have known about his representation for the bankruptcy.

If a creditor violates the FCCPA, the statute provides up to $1,000 in statutory damages, any actual damages, attorney’s fees and costs. Further, if a creditor commits any of the violations described above, they are most likely in violation of the bankruptcy automatic stay, as well ( this will be discussed in a future blog).

What Should You Do?

If a creditor contacts you via mail or phone after you have filed bankruptcy, you should immediately contact Berkowitz & Myer.  If you did not use our firm for your bankruptcy, we can work with your bankruptcy attorney to resolve the matter. If you hired Berkowitz & Myer for your bankruptcy, then you are already in good hands.  If you are being harassed by creditors or are considering filing for bankruptcy, contact our firm for a free consultation.

The Statute of Limitations for Debt Collection in Florida

If a creditor accuses you of not paying a debt, they can file a lawsuit against you in civil court to obtain a judgment against you. A judgment can have serious effects, as it can lead to wage garnishment and can significantly lower your credit score. For these reasons, you want to defend against a creditor judgment whenever possible and an experienced attorney can help you identify any possible defenses in your case.

One common defense is that the creditor filed the lawsuit after the statute of limitations had expired. A statute of limitations is a deadline for filing a particular legal claim and Florida law sets out different time limits for different types of legal actions. The Florida statutes of limitations that may apply to a creditor claim are as follows:

  • Debt based on a written contract – 5 years
  • Debt based on a verbal agreement – 4 years

The existence of these statutes of limitations does not stop many creditors and collection companies from continuing to file lawsuits against you after the deadline has passed. Most creditors hope that the debtor will not respond to the lawsuit, which will result in a default judgment.

Your Rights if the Statute of Limitations has Expired

In any creditor claim against you, you should always examine whether the statute of limitations has run. If it has, you can request that the claim be dismissed and, if the court agrees, the creditor loses the right to collect on that particular debt because they waited too long.

In addition, trying to collect a debt after the statute of limitations is considered to be abusive behavior under the Fair Debt Collection Practices Act. This means that beyond having the case dismissed, you can actually file your own claim against the creditor to hold them liable for abusive practices.

Call a St. Petersburg Creditor Harassment Lawyer as Soon as Possible

At Berkowitz & Myer, we stand up for consumers in Florida and will assert your rights in every case of creditor harassment. Please call our creditor harassment attorneys today at 727-344-0123.




no-cost consultation: (727) 344-0123