Every year, numerous individuals in Illinois and across the county turn to bankruptcy to achieve financial relief. Chapter 7 filings, in particular, are for those who lack the income necessary to make any type of payment to their creditors. When a Chapter 7 filing is approved, all qualifying debt is automatically discharged — meaning the filer no longer is responsible for it. Unfortunately, months or years after the fact, many individuals find themselves once again dealing with creditors trying to collect on these past debts.
Do creditors have the right to do this? Why do they do this? What can be done about it?
All around the country are people or companies who buy old debts for next to nothing then work to collect the full amount allegedly past due. While these debts may have been owed at one point, after a bankruptcy discharge kicks in, collectors have no legal rights to collect. This does not stop these debt buyers from trying, however.
Complaints regarding these zombie debts reached an all-time high in 2017. It has been worse in some states compared to others. While Illinois may not have made the top five list of states where attempted zombie debt collections are most frequently occurring, it does not mean that Illinois residents have not been affected.
What can Illinois residents do if debt collectors come calling for payment on debts discharged in Chapter 7 bankruptcy? Ask for debt verification. This generally needs to be done in writing. The creditor then has 30 days from receiving such a request to provide proof that the debt is still collectible. An experienced bankruptcy law attorney can provide more information about the best way to handle the situation if the debt collector is still insistent that the debt needs to be paid.
Source: CBS News, “5 states with the most “zombie debt” complaints“, Kathy Kristof, March 7, 2018