What to do with contractor demanding payment when I may be in bankruptcy?

1 week ago

I live in San Jose, CA. I hired a contractor to complete some repairs to a bathroom. The contract was for $20,000. To date, I have paid them $14,997. I owed them $5,003. I couldn’t pay the balance because my soon to be ex-husband filed bankruptcy and I needed an attorney to file a Stay of Relief. I wasn’t trying to not pay them but the demand letter the title received was for $13,000 which includes 10% compounded interest from the date of filing which was May 2019. Do I have any recourse.

Senior Legal Associate Levelset

The options for fighting back against a creditor may depend quite a bit on whether the bankruptcy involved one spouse or both spouses.

If a bankruptcy filing includes both spouses, then traditional rules surrounding bankruptcy would apply (more on those below). But, if one spouse files bankruptcy while the other does not, creditors may still attempt recovery against the non-filing spouse (insofar as that spouse was actually responsible for the debt). In that case, a debtor could likely be held responsible for the debt, and it might be a good idea to consult with a local California lawyer to decide how best to manage the potential liability for that debt.

Further discussion here: Legal Effects When Only One Spouse Files for Bankruptcy | LegalMatch.

Protection from creditors when you’ve filed bankrupcty

When bankruptcy is filed, the automatic stay prevents debtors from then going after the bankrupt party. Further, most debts – particularly unsecured debts – will be stripped away during the course of bankruptcy proceedings.

If the automatic stay is still in effect, it may be helpful to inform the creditor of that fact and that they’re prohibited from collection attempts during the stay. Further, it’s generally a good idea to keep record of those attempts and to inform you bankruptcy attorney of the collection attempts. If a creditor is intentionally violating the automatic stay, they could end up being liable to the debtor for damages. More on navigating creditors and the automatic stay here: Your Rights When a Creditor Violates the Automatic Stay | The Balance.

Now, if a debt is discharged and the creditor still comes knocking – that might be a more serious situation (at least for the creditor). Attempts to recover a debt that’s been discharged through bankruptcy actually violate federal law, and a debtor may have a cause of action against a creditor violating the law. More on that here: When Creditors Call After Discharge | Bankruptcy in Brief; or When Creditors Come Calling After Your Bankruptcy Discharge | National Bankruptcy Forum.

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