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NCBLC - National Consumer Bankruptcy Litigation Center

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Automatic Stay Violations

In most bankruptcy cases, an automatic stay is entered immediately upon filing. This "stay" prohibits creditors from continuing to collect on debts. That means no phone calls, no collection letters, no legal action, no repossession-no collection activity outside the bankruptcy case.

If your creditors continue to harass you after notice of the automatic stay, they are violating the stay and you can fight back. You may be able to collect monetary compensation from creditors that violate the automatic stay and force them to pay your legal fees. You may also have recourse against creditors who violate the automatic stay under the Fair Debt Collection Practices Act.

Section 362(h) of the Bankruptcy Code provides for penalties against creditors that violate the stay:

"An individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys' fees, and, in appropriate circumstances, may recover punitive damages."

For example, if you default on your car loan and you're not in bankruptcy, the creditor can repossess your car. However, a creditor who repossesses your car after you file bankruptcy must return the car and stop all collection attempts for as long as the automatic stay is in effect. The stay remains in effect until:

• The bankruptcy case is closed;
• The bankruptcy case is dismissed;
• The bankruptcy discharge is granted or denied;
• The property is no longer property of the bankruptcy estate; or
• The stay is lifted by order of the bankruptcy court.

Whether the court will impose a penalty on the creditor depends on whether the violation was willful. Some of the clearest and most common violations of the automatic stay include:

• Repossessing your car;
• Locking you out of leased property;
• Filing a state court action against a you;
• Continued efforts to collect debts owed before filing bankruptcy. This may mean an action as small as sending a collection letter or making a phone call with knowledge that the automatic stay is in effect.

If the creditor's actions are egregious and you suffer actual monetary damages because of the continued collection activities, punitive damages may be imposed.

Stay violations by creditors have increased as the sale of credit card accounts has become increasingly common. Credit card accounts in bankruptcy are considered commodities to be exchanged. Sometimes these violations are inadvertent, because the selling company has failed to identify your account as a bankruptcy case. In other cases, though, debt purchasing companies intentionally pursue or report invalid claims in hopes that you won't know that you don't have to pay them.

Your protection doesn't necessarily end when the automatic stay terminates, either. Once a debt is discharged, a creditor is forever barred from pursuing that debt. A bankruptcy attorney can help you enforce your rights under both the automatic stay and the Fair Debt Collection Practices Act. And if you've been contacted about a debt that has been discharged in bankruptcy or a discharged debt is appearing on your credit report, the NCBLC may be able to help. Fill out our free case evaluation form right now!

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