The Automatic Stay created by Bankruptcy Code § 362 is the most important protection afforded to a debtor by the filing of a bankruptcy petition under Chapter 7, Chapter 13, or Chapter 11, and it goes into effect immediately upon the filing of the petition. The Automatic Stay prevents most creditors from doing anything to collect or enforce their pre-petition claim (i.e. claim arose before the bankruptcy filing) against the debtor, and prohibits such debt collection practices as dunning phone calls and collection letters and the commencement or continuation of wage garnishments and bank account restraints, repossessions and lawsuits, including foreclosures.
The Automatic Stay continues in effect after you receive your Discharge in the form of the Discharge Injunction created by Bankruptcy Code § 524(a), which prevents creditors from trying to collect from the debtor personally on the debts that were discharged.
In certain circumstances, a creditor (usually) possessing a secured debt may bring a motion in Bankruptcy Court seeking relief from the Automatic Stay so they can resume their collection or foreclosure efforts. A secured debt is one in which a creditor has a lien on some item of debtor’s property to insure payment of the debt. The most common examples of secured debt are home mortgages and car loans. The motion referred to herein is typically made when a debtor fails to make his mortgage or car payment after the bankruptcy has been filed. If such a motion is made in your case, it should be discussed with the attorney in our law firm handling your case.
There are certain collection activities in certain types of matters that are not barred by the Automatic Stay or the Discharge Injunction. Most of these exceptions do not impact the typical consumer debtor, but the few that do generally have to do with pending criminal prosecutions, certain income tax proceedings and those proceedings involving paternity, child custody and support and alimony.
A creditor violates the Automatic Stay when they know that a debtor has filed for bankruptcy but, without first obtaining Bankruptcy Court permission, still continue with their efforts to collect their debt or repossess collateral. If this happens, you should immediately convey this information to the attorney in our law firm handling your bankruptcy case. While many violations of the Automatic Stay are not intentional and are easily resolved by a single phone call or fax, there are times when a creditor’s actions in violation of the Automatic Stay are intentional and persistent and obnoxious, and can cause an already stressed out debtor additional emotional and financial grief. In these circumstances, a motion seeking sanctions can be made to the Bankruptcy Court, and it is not unusual for the Court to award damages and attorney’s fees to the aggrieved debtor upon proper proof being presented establishing the debtor’s claim. Motions seeking sanctions can also be made when a creditor violates the Discharge Injunction. Even though you may feel that your bankruptcy case is “over”, if the Discharge Injunction is being violated, you should convey this information to the attorney in our law firm handling your bankruptcy case. Our Experienced Bankruptcy Law Firm will continue to defend and protect your rights for as long as it’s necessary.