A woman by the name of Ann Elk is filing bankruptcy. She ostensibly owes about $5,000 to a creditor by the name of Orbit Bank. Orbit Bank has contracted with InMotion Debt Collectors to retrieve that debt. Concurrent to this, Ann starts to file a Chapter 7 bankruptcy. An automatic stay, thus, is then issued to help keep the creditors at bay and regulate what they are allowed to do. Despite this, InMotion initially demands that she pay $1,000, which Ann does. Subsequent to this, InMotion files a lawsuit demanding the entire amount due. While InMotion is being aggressive, Ann’s lawyer is wise to tell her to disregard the lawsuit.
Analysis
Ann’s rights under the bankruptcy code are certainly being trampled on by InMotion. The question of just how much of this is going on would depend on what the automatic stay relating to the Chapter 7 motion went into effect and when InMotion became aware of it. Regardless, there are some things that are not subject to debate. Indeed, the beginning of Chapter 7 proceedings means that all of the creditors would be informed about the matter. The automatic stay would immediately be in effect. Given that, Ann...
She did make that $1,000 payment and it will surely be applied to what she owes. However, InMotion is not going to get anywhere with the lawsuit. The reason is that an automatic stay under Chapter 7 generally puts a halt to a number of legal options and ploys that creditors and their agents will try. This includes lawsuits, garnishments and so forth. It should also stop collection calls and other attempts to collect the debt. It is true that recognizing the legitimacy of a debt can give the debt collector/creditor rights to collect further. However, this is at least temporary nullified when there is bankruptcy proceedings that involve any sort of stay (FindLaw, 2018).
Just how much trouble InMotion might be in would depend on when (or if) they were made aware of the Chapter 7 proceedings. Of course, that would depend on timing, who Ann indicated as being the creditor and whether that information filtered to InMotion or not. Indeed, Ann might have given the name/address of Orbit Bank. This would make sense given that they were the original creditor. Whether Orbit has done…
