What Happens If a Creditor Violates the Automatic Stay After a Bankruptcy Filing?

When you file for consumer bankruptcy, you should not have to be worried about creditors continuing to engage in collection activities against you because of the automatic stay. Yet creditors and debt collectors do not always abide by the law. What happens, then, in a case where the creditor violates the automatic stay after you have filed for personal bankruptcy?

Understanding How the Automatic Stay Works

After you file for Chapter 7 bankruptcy or Chapter 13 bankruptcy, something known as the “automatic stay” immediately applies to your case and prevents creditors or debt collectors from taking any additional actions against you in order to collect on debts owed. According to the Cornell Legal Information Institute (LII), the automatic stay is “an automatic injunction that prohibits most creditor collection activities after the debtor has filed for bankruptcy,” and it “begins at the moment the bankruptcy petition is filed.” For example, the automatic stay prevents creditors from filing a lawsuit against you for debt, moving forward with a lawsuit or garnishment, and proceeding with any type of foreclosure or repossession action.

There are only limited circumstances in which a debtor can still try to obtain immediate relief despite the automatic stay. Generally speaking, only a secured creditor can ask the bankruptcy court to lift the automatic stay if that creditor does not believe it will have appropriate protections in the bankruptcy case. Yet this kind of action is uncommon, and debtors should be able to trust that the automatic stay will prevent creditors from any collection activity unless the court says otherwise. There are some other types of debt that can still be collected during a bankruptcy case, as well, including family support obligations (like child support).

What Will Happen if a Creditor Violates the Automatic Stay

If the automatic stay has not been lifted for a secured creditor and the debt that is being collected is one to which the automatic stay does apply, a creditor who continues to call you or to take other collection actions could be violating the automatic stay. What will happen? Assuming that there is no applicable exception (such as those discussed above), you should immediately let your bankruptcy lawyer know about the collection action. Your attorney can inform the creditor about the bankruptcy case, which may result in the creditor taking remedial action. If the creditor continues to take collection actions, you can notify the bankruptcy court.

When a bankruptcy court determines that a creditor has willfully violated the automatic stay, the creditor can be sanctioned. In practical terms, this means the creditor can be fined by the court and can be ordered to pay attorney’s fees and damages. If the creditor still will not cease collection actions after being sanctioned by the bankruptcy court, you should work with your attorney to determine whether the creditor has violated any other laws designed to protect consumers and whether you are eligible to file a lawsuit.

Contact an Oak Park Bankruptcy Lawyer

Do you need assistance with your bankruptcy case? Our Oak Park bankruptcy attorneys are here to help. Contact the Emerson Law Firm today to speak with us about your case.


See Related Blog Posts:

Can I Discharge My PPP Loan in Bankruptcy?

What is Chapter 11 Bankruptcy for Consumers?





Comments

Post a Comment

Popular posts from this blog

Phantom Debt Collection Scams on the Rise in Illinois

Have you been contacted by a person claiming to be a debt collector who is seeking to recover a debt you allegedly owe? If so, you are not alone. According to a recent report from CBS Chicago , such parties claiming to be debt collectors are on the rise, and they are scamming Chicago-area residents. These alleged debt collectors are part of schemes known as “phantom debt collection scams,” since they involve the attempt to collect on a debt that the consumer does not actually owe. How can you avoid becoming a victim in a debt-collection scam ? What should you do if you have been targeted by a fake debt collector? How Do Phantom Debt Collection Scams Work? Now, you might be thinking to yourself: I would never agree to make payment on a debt that I did not owe. But the scam is not always that simple. Parties at the center of debt-collection scams often target consumers who do actually owe debts (to someone or to some entity), and they prey on the fact that these c...
Read more

Payday Lending and Predatory Lenders in Illinois

If you are in substantial debt in the Chicago area and are living in a paycheck-to-paycheck cycle, you may have taken out a payday loan to make ends meet. While payday lending is illegal in a number of states due to the predatory nature of these loans, it remains legal in Illinois. As a result, many debtors in the state have used payday lenders, and far too many of those borrowers cannot repay what they owe. According to a recent article from Progress Illinois , consumers have filed complaints about payday lenders in the state, illuminating a need for federal rules that address harmful lending practices . Predatory Payday Lenders and Protections for Consumers Due to the perceived predatory nature of payday loans, twelve states in the country have banned these lenders from operating completely, according to a fact sheet from loans.org . The states that currently have laws prohibiting payday lenders from operating include Arkansas, Arizona, Connecticut, Georgia, Mary...
Read more

New Information on Debts That Bankruptcy Cannot Discharge

If you are thinking about filing for bankruptcy in the Oak Park area, it is important to know that certain kinds of debts cannot be discharged in a bankruptcy case. Under U.S. bankruptcy law, these are known as non-dischargeable debts, or exceptions to discharge. There are certain types of debts that have long been identified clearly as non-dischargeable debts, while there are misconceptions about other types of debts that may or may not be dischargeable. As an article in CNBC discusses, the U.S. Supreme Court recently issued a ruling in the case of Bartenwerfer v. Buckley , which clarifies that debts incurred due to another party’s fraud cannot be discharged in an individual’s bankruptcy case. Our Oak Park bankruptcy attorneys can explain the Court’s recent ruling and provide you with additional information on dischargeable and non-dischargeable debts. Supreme Court Says Debt Incurred Due to Another’s Fraud is Non-Dischargeable The recent Bartenwerfer case involved a debtor attempti...
Read more