When Creditors Violate The Automatic Stay - Oops, They Did It Again
By Jay Fleischman, New York Bankruptcy Lawyer on Oct 7, 2007 in Bankruptcy Protection & Automatic Stay
With apologies to Ms. Spears, it seems as if creditors who violate the automatic stay in bankruptcy fall back on the now-familiar refrain that they made a mistake and promise to never do it again. As if that were all that mattered, some judges will use the rubber stamp and let it slide.
Why? Bad lawyering?. A bad judge? Something else entirely? Well, it depends.
It’s important to remember that the automatic stay is real, and it applies to everyone. But it does not apply unless you (or your lawyer) takes some specific steps to protect you interests.
Section 362 of the US Bankruptcy Code states that § 362. Automatic stay states that the filing of a petition in bankruptcy operates as a stay,
- applicable to all entities
, of the commencement or continuation, of any action against the debtor. Period. There are some exceptions, but for the most part if you’ve got a pre-petition credit card, student loan, personal loan, mortgage, car or loan or consumer debt then you are “hands off” once the case hits the court house door.
Section 362(k) states that an individual injured by any willful violation of a stay shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.
So what’s a willful violation of a stay? Well, the creditor needs to know - or have reason to know - that you have filed for bankruptcy. They need to take an action to collect against you after that stay is in effect. They don’t need to willfully violate the stay, they need to willfully take the action. That means the creditor needs to mean to send out the collection letter after that creditor knows of the stay.
Creditors, as I said at the beginning of this article, commonly walk into court and claim that they didn’t know about the stay and made a mistake. That’s why it’s important - critical, really - to always be sure that your creditors are properly notified of your bankruptcy case by listing them on the schedules. And above that, the prudent lawyer will always give an offending creditor a warning letter when a post-filing collection letter is sent. Give ‘em enough rope and they’re sure to hang themselves, as the saying goes.
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