Why shouldn't I inform a creditor of my intention to file for bankruptcy?

[lotsahats]

Some of the most respected posters on this forum would not advise that you disclose your financial situation to a debt collector. I know this is very good advise, and I fully intend to take heed, but I always have to understand the whys and wherefores of a situation.

Why is warning a debt collector that you are collection proof and/or intend to file bankruptcy a bad idea? Why doesn't it stop them from pursuing the matter? Don't they do asset checks? I know that if I were a debt collector, and a person clearly had nothing to lose by filing bankruptcy, I wouldn't waste time and money dragging them to court, only to obtain a worthless judgement. True, their circumstances could change in the future, but why gamble?

[keepmine]

Some of the most respected posters on this forum would not advise that you disclose your financial situation to a debt collector. I know this is very good advise, and I fully intend to take heed, but I always have to understand the whys and wherefores of a situation.

Why is warning a debt collector that you are collection proof and/or intend to file bankruptcy a bad idea? Why doesn't it stop them from pursuing the matter? Don't they do asset checks? I know that if I were a debt collector, and a person clearly had nothing to lose by filing bankruptcy, I wouldn't waste time and money dragging them to court, only to obtain a worthless judgement. True, their circumstances could change in the future, but why gamble?

Creditots hear the "B" word a few million times a day. Truth is, only a small percentage of debtors actually follow through so, until you actually file, it's just a bluff.
Asset searches usually take place after a judgment is returned and a debtors exam is scheduled.
There is also the large unknown as far as what someone will do if they get scared. Many posts on this board and others where people cashed out retirement accounts that are exempt from seizure or, asked family for money to repay debts that could be discharged in bk.
If bk is the endgame, just go ahead and file and don't have any interaction with these people.

[SweetGeorgia]

And those are the smart ones.

Creditors - even attorneys - often don't understand bankruptcy law. They think "judgments obtained before bankruptcy aren't affected" or "anything I seize before bankruptcy I get to keep," and who knows what else. That kind of creditor might rush to the courthouse if they hear your BK plans; if you are waiting to file for one reason or another you could get tripped up by THEIR ignorance.

Debt collectors are often evil, but ignorance and stupidity also play a role!

[shark66]

In my book, there's no reason to speak to debt collectors - ever.

The sole exception would be a situation where an uninformed/arrogant/whatever collector decides to call you *after* you've filed. Then you read them The Riot Act...

Good luck to us all.

[lillymarlene]

In my book, there's no reason to speak to debt collectors - ever.

That's for sure. Out of curiosity, about 2 days before I filed I spoke to a creditor that kept continually calling. I told them I was seriously considering bankruptcy, and the collector claimed there was so much I could do, I didn't have to go that far, bankruptcy is a terrible thing, I don't want to damage my credit, etc. So I waited on the phone for about 10 minutes while he got his boss. Then, she said if I didn't pay immediately, they would pursue legal action... What a waste of time that turned out to be.

Then I had a few that filtered through after I filed, but that was kind of enjoyable, giving out my case number. :-)

[frogger]

Why is warning a debt collector that you are collection proof and/or intend to file bankruptcy a bad idea? Why doesn't it stop them from pursuing the matter?

Because they don't care. Until you file, talk is cheap, and "I'm filing bk" is heard a million times a day.

Until/Unless you have a case number, anything you say is wasted air.

[JackBondLove]

In my book, there's no reason to speak to debt collectors - ever.

Well, trying to stave off them from filing a lawsuit is definitely a good reason. There was about a 4-1/2 month period from the time I quit paying creditors to buying my house (whereas before I had a lot of that cash for that purchase as well as living expenses sitting in an easily confiscated bank account!) in which I kept in contact just to make sure that they wouldn't file that lawsuit. I used the ploy that I had discussed filing BK with an attorney but had not made up the decision to file, and am considering all options, especially those that involved a settlement (so that I could wrangle an offer that I would say I needed time to consider, etc., just to string them along.) And I always tried to take to every creditor once a month so they wouldn't call up family members (how do they find that info out anyway?)

[frogger]

And I always tried to take to every creditor once a month so they wouldn't call up family members (how do they find that info out anyway?)

That's easy.

[GoingDown]

Some of the most respected posters on this forum would not advise that you disclose your financial situation to a debt collector. I know this is very good advise, and I fully intend to take heed, but I always have to understand the whys and wherefores of a situation.

Why is warning a debt collector that you are collection proof and/or intend to file bankruptcy a bad idea? Why doesn't it stop them from pursuing the matter? Don't they do asset checks? I know that if I were a debt collector, and a person clearly had nothing to lose by filing bankruptcy, I wouldn't waste time and money dragging them to court, only to obtain a worthless judgement. True, their circumstances could change in the future, but why gamble?

First, you need to make a distinction between talking to a debt collector on the phone vs. writing to the creditor or junk debt buyer.

The person who is talking to you on the phone is usually the lowest form of scum on earth. Many of them just got out of prison and couldn't find a job doing anything else. You will get nowhere talking on the phone to these people.

Also, remember that they are trained to talk to you to get all sorts of information out of you and to scare you into making a payment to them. Telephone conversations usually lead to you divulging far more information than you would want to give them.

When you put something in writing, you can control exactly what information you choose to give them. And because it is writing, it will usually bypass the flunky working on the phone and get up to a higher level where they can evaluate the information and perhaps make a decision about it based upon the information. For example, if I was one of managers of a junk debt buyer and I got a letter that told me the person was judgment proof/collection proof, I would do some asset searches before I bothered wasting any money on a lawsuit against them. I personally think it has helped me from getting sued as much as most people on this forum.

I don't go into any personal details, other than that I have no assets to take, no real estate, no checking accounts, no savings accounts, no stocks, no bonds, no wages to garnish, etc., etc., and that a judgment would be a waste of their time, since I have nothing to take.

Other things I put in the letter include the general cease and desist communications wording, which lets them know that even if they get a judgment against me, it won't be easy to get me to pay it because they won't be able to call me about it. And I tell them I will record all of their phone calls, and sue them if they violate the FDCPA.

I also include the general demand to use arbitration instead of going to court, since all of my old charged off accounts had arbitration clauses in their agreements. As it turns out, debt collectors now hate arbitration.

And at the end of the letter, I let them know that even if they do end up getting a judgment, I will never voluntarily pay them a penny of it, and that I will fight against them every step of the way, and if necessary, I will file bankruptcy, making their judgment worthless.

To my way of thinking, if someone in management at the junk debt buyer got this letter, they would know that filing a lawsuit would be a waste of time, money, and effort against me. They might get a judgment against me, but they would never collect a penny of it. And if my circumstances changed to the point where I needed to file bankruptcy to get out from under the judgment, I would.

[nceguyfromne]

I think you should be asking yourself the same question. Why gamble? How does it benefit you to stir the pot and tell the creditor your intentions to file bankruptcy? True, it may be emotionally satisfying to put them in their place and you are right, it's a gamble for them to pursue a judgment they'll probably never collect, but for you, the best kind judgment is one that never happened in the first place. A discharged judgment won't cost you money but it's still an ugly mark on your credit. If you have a creditor in a holding pattern -- mailing you letters and speaking to your answering machine -- then that is the best place to keep them until you've filed your bankruptcy and are truly judgment-proof. If the calls bother you that much in the meantime, consider spending $15 to change your phone number.

[GoingDown]

I've been doing this since 2005, and out of my many charged off credit card accounts, only one bothered to sue me, so I consider this to have been very effective.

I think it only works if a person is truly judgment proof, and has no work number for the debt collectors to find (no verifiable employment), and if their credit report doesn't have any new collection triggers-- new applications for credit, new applications for employment, new phone number and address information, etc.

I noticed after I sent out these letters, there was a flury of activity by the creditors-- lots of hard pulls of my credit reports trying to verify my judgment proof status, lots of phone calls to former employers and even landlords about me-- they were checking me out, trying to figure out if what I said in the letter was true. And once they found out it was true, they gave up on me. They didn't want to waste their money, time, and effort on a lawsuit against me knowing it would never be paid.

It was the cheapest and easiest thing to do.

And I got tired of the calls to me, my relatives, and neighbors, so I used the cease and desist communications letters to get them to stop calling. That has been extremely effective for me.

But for those who are not judgment proof, I say go ahead and file bankruptcy and get it over with.