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Practical Bankruptcy: Dealing with Collection Agents Who Say They Will Object to Your Bankruptcy

Most debts can be written off in bankruptcy. Collection agents who say otherwise about your debt are often wrong. Here’s how it works.


No question—some types of debts can’t be discharged—legally written off—in bankruptcy. Child and spousal support, most recent taxes, most student loans, criminal fines and restitution are common examples.

In addition the discharge of any debt can be challenged by the creditor, BUT only under very narrow grounds.  For a creditor to succeed in such a challenge it must show serious inappropriate behavior by you, usually rising to the level of fraud. That involves you intentionally cheating the creditor during the process of getting the loan or other form of credit. This most often takes the form of lying on a credit application, or incurring a debt without your intent at that time to pay it back.

Because these grounds for challenging discharge are quite narrow, creditors seldom actually raise such challenges once a bankruptcy is filed. But before then, it’s not unusual for collection agents to try to convince debtors to pay the debt on the argument that filing bankruptcy would not help because the creditor would object to the debt being discharged.

Here’s an illustration how this usually plays out.

The Threat by the Collection Agent

In early 2011 Larry was seriously injured in a vehicle accident, as a passenger in a car driven and owed by his friend. His friend and the other two passengers also sustained significant injuries. The accident was caused by the other vehicle’s driver, who was uninsured. Larry’s friend had only the minimum required uninsured driver’s coverage, which was far exceeded by the medical expenses of Larry and the other three people in that vehicle. Larry ended up with $29,000 of unpaid medical bills. He had already been on shaky financial ground before being hit with this new debt, so he had no means to pay it.

Larry kept getting calls from a collection agency trying to collect on the medical debt. When he told them this debt was driving him to consider filing bankruptcy, the collection agent told him that it would do him no good because the agency would “fight him” on it and make him pay it all eventually anyway.

The Very Likely Truth

Larry half-believed the collection agent because she was a smooth talker. But out of desperation he met with a bankruptcy attorney and found out that the $29,000 in medical debts could almost certainly be discharged in bankruptcy. For a creditor’s challenge to succeed, it would have to prove that Larry set out to cheat it when he became liable on the medical charges. Not only would that be extremely unusual in any medical context, in his situation he was unconscious when he was admitted, and barely conscious for the first week or two when a majority of the medical charges were incurred in the emergency and intensive care departments. Larry filed a Chapter 7 bankruptcy case on his attorney’s advice that the collection agent was almost certainly either lying or completely misinformed, and that the medical debt would in all likelihood be discharged.

The Truth Played Out

Larry felt all the better about filing his Chapter 7 case in spite of the collection agent’s threat because he was also advised by his attorney that he would not have to wait long to make absolutely sure that its threat was bogus. Any creditor which believes it has fraud-related grounds for objecting to the discharge of its debt must file a formal complaint laying out its argument by an absolute deadline or it forever loses its ability to do so.  That deadline is a quick one—60 days after the initially scheduled “meeting of creditors,” which is usually about a month after the filing of the case.

So Larry went to his Chapter 7 “meeting of creditors” with his attorney. This was a straightforward, 5-minute meeting with his bankruptcy trustee. As expected no creditors were there, including none of his medical creditors. Then after 60 more days passed, the complaint deadline came and went with, as expected, no complaints filed. A few days later Larry received his “Discharge of Debtor” order from the bankruptcy court. So, about 100 days after filing his case, Larry no longer owed any of his debts, including the $29,000 in medical ones. 

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