Can Creditors Violate the Automatic Stay in Bankruptcy?

One of the reasons people choose to file bankruptcy is to stop collection efforts. When people owe a significant amount of debt, they often face constant phone calls from debt collection companies, wage garnishments, and even foreclosure actions on their home. Filing bankruptcy does not only allow borrowers to discharge some or all of their debt, but it also stops these collection efforts, at least temporarily.

Collection efforts are halted after a debtor files bankruptcy due to the automatic stay. The automatic stay provides additional protection for people filing bankruptcy, and it is a law that creditors must abide by. There are only certain instances when the automatic stay does not apply to creditors. Below, our Florida bankruptcy lawyer explains when these are.

What is the Automatic Stay? 

The automatic stay is defined in the U.S. Bankruptcy Code as an injunction that is effective immediately, prohibiting most creditor collection activities after the borrower has filed their bankruptcy petition. This means that the automatic stay halts creditors from trying to collect debts from debtors. It also means that any ongoing actions, such as foreclosure proceedings, wage garnishments, or lawsuits, are also halted until the bankruptcy case is finalized. As the name suggests, the automatic stay is effective as soon as bankruptcy is filed.

When Can Creditors Violate the Automatic Stay? 

Creditors are never allowed to violate the automatic stay. Generally speaking, once an automatic stay is in place, creditors and debt collectors must stop all collection efforts. That being said, there are times when creditors can ask the court to partially lift the automatic stay. In these instances, the automatic stay is not lifted entirely, but it may be lifted for the creditor who makes the request.

In most cases, it is creditors of secured debt that request a partial lifting of the automatic stay. For example, a financial institution may ask the bankruptcy court to partially lift an automatic stay so they can move forward with foreclosure proceedings. Even when a creditor asks the court to partially lift the automatic stay, they cannot proceed with collection efforts until the court has officially approved the request.

Steps to Take if a Creditor Violates the Automatic Stay

 If a creditor has not obtained court approval to partially lift the automatic stay and proceed with collection efforts but they do so anyway, there are certain steps you can take. In these instances, you may be eligible for damages caused by the continued collection efforts, punitive damages, and attorney fees required to defend against these actions. It is critical to speak to a Florida bankruptcy lawyer who can advise on the steps to take and guide you through the process.

Our Bankruptcy Lawyer in Florida Will Protect Your Rights 

When filing bankruptcy, you have many rights. At Nowack & Olson, PLLC, our Florida bankruptcy lawyer will ensure they are upheld so the process is as easy as possible for you and so you obtain the best possible outcome. Call us now or contact us online to schedule a consultation and to get the legal help you need.

Source:

uscode.house.gov/view.xhtml?req=granuleid:USC-1999-title11-section362&num=0&edition=1999