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Avoiding Creditor Pitfalls

Sept. 17, 2020

Due to numerous consumer protections like the Fair Debt Collection Practices Act (FDCPA), Fair Credit Reporting Act (FCRA), and state laws governing debt collection, it is important for a creditor to be knowledgable about the legal process for collecting a debt.

There are many pitfalls for creditors who do not have ample experience with debt collection, which can delay the collection process or even subject creditors to liability. Understanding the relevant time periods and necessary steps for taking legal action is critical so that you can recover debt quickly without violating any collection statutes.

Landlord-Tenant Issues / Unlawful Detainers

As the owner of an investment property, it is absolutely vital to your bottom line that you are promptly and consistently paid by your tenants.

After all, you have costs associated with property ownership such as the mortgage, upkeep, utilities, and insurance. In order to ensure that your investment property is a success, it is necessary to be able to navigate the legal process in situations where you have a tenant who is not paying their rent.

At Vivona Pandurangi, PLC, we will take care of this process for you and ensure that all notices, pleadings, and evidence are properly prepared so that this process is as smooth and efficient as possible. For more information and a primer on unlawful detainers, please review my blog post on the eviction process in Virginia.

Representation of Creditors in Bankruptcy

A frustrating moment for any creditor is receiving a notice in the mail that the person who owes you money has filed for bankruptcy.

Even when your case and collection efforts are going smoothly, and you have undertaken best practices to protect yourself, a bankruptcy filing can impede your collection process.

However, it is important in these circumstances to realize that you have rights in bankruptcy and to understand what the impact of the filing will be on your claim. This impact will be determined by a variety of factors, including the type of claim you have, the value of that claim, the chapter the debtor is filing under, and the income and assets of the debtor.

Because the bankruptcy process must deal with many creditors at once and find a way to resolve a myriad of claims, it is a process that operates rather quickly and one in which you must be cognizant of deadlines. It is vital that you seek counsel shortly after receiving any notice of bankruptcy to determine what recourse you have in bankruptcy and what you need to do to protect your rights.

To learn more about the bankruptcy process and filing deadlines, click here.

Motions for Relief from Stay

One of the major consequences of a debtor filing bankruptcy is that an immediate stay goes into effect which bars the continuance of any collection actions which are pending against the debtor.

This “automatic stay” will stall any lawsuit, garnishment, foreclosure sale, eviction, or other collection action. In addition, creditors who violate the stay by continuing their collection action after the bankruptcy filing can be subjected to sanctions.

As a result of the automatic stay, before a creditor can continue to pursue any collection action against the debtor they must first obtain an order granting them relief from the stay in the debtor’s bankruptcy case. Once they have obtained this order, they can resume the collection process without worrying that they are running afoul of the bankruptcy code.

A bankruptcy filing can often delay a creditor’s ability to collect for months, if not years if the creditor is not active in seeking redress from the bankruptcy court.

Consulting an experienced bankruptcy counsel is important in these cases because they can get you quickly through the court process and minimize the effect on you of the debtor’s bankruptcy filing. If a creditor acts quickly, the bankruptcy filing can become only a minor hurdle in your collection of the debt.

Debt Collection

Due to our practice in bankruptcy law, we understand the ins and outs of collections and tracking a debtor's assets such as bank accounts, real property, wages, business or investment income, and inheritances. We can help you pursue the remedies that are available to creditors under Virginia law to obtain payment of a judgment.

We will also ensure that you are in compliance with federal statutes governing the collection of debt like the Fair Debt Collection Practices Act (FDCPA), Fair Credit Reporting Act (FCRA), and Bankruptcy Code by following all applicable collection laws and procedures.

In most cases, the creditor that acts quickly in collecting a debt is best off because they can get to the debtor’s income and assets before the debtor has an opportunity to transfer, diminish or hide these assets. Another reason to be diligent in pursuing debt collection is that when multiple creditors are pursuing a single debtor the “first in time, first in right” rule frequently applies.

This is why collection efforts by multiple creditors against one debtor are often referred to as a “race to the courthouse”. While there are various ways that creditors’ claims can be considered to have priority over other claims, many times priority simply comes down to who acts first in seizing income and assets.

We offer services to both secured and unsecured creditors, including representation in the filing and prosecution of warrants in debt, complaints in circuit court, garnishments, unlawful detainers, detinue actions, summons to answer interrogatories, and obtaining liens on any property.