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Brent Blanchard
Brent Blanchard, Bankruptcy Attorney
Category: Bankruptcy Law
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Experience:  Twelve years experience in all aspects of debtor & creditor BK.
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This question is for Brent Blanchard: I work in the bankruptcy

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This question is for Brent Blanchard:

I work in the bankruptcy department of a company that collects debt for debt owners. Recently, we received notice from an original creditor (a bank) that the amount of debt reported for particular accounts was incorrect, specifically, too much interest was added.

We want to send a letter informing the debtors of this mistake. In a bankruptcy scenario, shouldn't this letter be sent to the debtor's attorney and to the trustee (assuming the debtor is represented by counsel), and NOT to the debtor? There is a dispute in our department as to whom the letter should be sent. I am of the belief that "erring on the side of caution" is always preferable when dealing with the bankruptcy courts.

I understand that your answer to my question is not legal advice given in a representative capacity. I just want to know what you think.

Thank You.
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  Brent Blanchard replied 1 year ago.
Thank you for your question.

The reluctance to contact, and common recommendation to NOT contact, a Debtor (or party to litigation directly) generally flows from two concerns:

1. The possibility that something damaging to that person's case could be said, especially if from ignorance of the law. Admitting liability when the law would not really impose it after an accident is a common theme here.

2. There is an ethical rule that prevents *attorneys* for one side from contacting *parties* in litigation when those parties are represented by their own attorneys. The concern is that the mean attorney will brow-beat or otherwise intimidate the poor litigant into saying or doing something that would compromise their case.

In all honesty, I have had good experiences often enough with my Client contacting the other attorney's Client directly to discuss settlement, that I am often quite willing to allow that by-passing of the other attorney. Some of my colleagues try so hard to protect their clients, they can be an obstacle to reasonable settlements.

So, there is nothing improper about parties talking to parties.

BUT with bankruptcy situations, there are OTHER creditors involved, so the standard practice is to send the same notice sent to a debtor to the debtor's attorney (MANY debtors don't bother to pass the word along!), AND put that notice of amendment to a claim into BK Court paperwork if proofs of claim have already been filed, OR put that notice of corrected claim into something like a "notice of errata" which is then served on everyone involved in the BK case.

Because every BK case involves balancing the rights of the debtor to get a discharge of debts, with the creditors' rights to get paid the maximum possible from the assets (if any) of the BK estate, the best route is to make sure that everyone knows what is happening.

Thank you.

BAB.
Brent Blanchard, Bankruptcy Attorney
Category: Bankruptcy Law
Satisfied Customers: 1908
Experience: Twelve years experience in all aspects of debtor & creditor BK.
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Twelve years experience in all aspects of debtor & creditor BK.