Harassment During Bankruptcy
THE AUTOMATIC STAY
The filing of a consumer bankruptcy case, Chapter 7 or Chapter 13, instantly triggers one of the most powerful injunctions available, the Automatic Stay. This injunction, provided by 11 U.S.C. 362, prohibits the continuance of any action by any creditor against the debtor or the debtor’s property. In Chapter 13, the stay even protects co-debtors who are liable with the debtor on consumer debts. The automatic stay gives the debtor protection from his creditors, subject to the oversight of the bankruptcy judge, and brings all of the debtor’s assets and creditors into the same forum, the bankruptcy court, where the rights of all concerned can be balanced.
The automatic stay prohibits, among other things:
- Beginning or continuing law suits
- Collection Calls
- Creditor Harassment
- Foreclosure Sales
- Garnishments and Levies
- Duration of Stay
The automatic stay remains in effect until:
- a judge lifts the stay upon granting the request of a creditor after a hearing;
- the debtor gets a discharge; or
- the item of property is no longer property of the estate.
- Stay permanent upon discharge
When the debtor gets a discharge, the automatic stay is replaced by a permanent injunction prohibiting creditors from all of those actions with respect to discharged pre-petition debts that the automatic stay prohibited.
Outside the stay
The automatic stay does not stop the following:
- Criminal proceedings.
- Actions for a family support order or the modification of such order.
- Actions to collect support from property that is not property of the estate.
- Tax audit, demand for tax returns or assessment of tax (collection of tax is still stayed: the tax authorities, to their chagrin, are subject to the stay, just like other creditors).
Anyone who willfully violates the stay in the case of an individual is liable for actual damages caused by the violation and sometimes for punitive damages. Some courts confine the right to damages to individual debtors and deny damages for stay violations as to corporate debtors.
Since the court usually takes several days to several weeks to mail creditors notice of the bankruptcy, it is incumbent on the debtor or debtor’s counsel to give actual notice to creditors who might take action without knowledge of the stay.
Creditor actions taken after the stay is in place are generally void or voidable: that is, any action the creditor takes in violation of the stay has no legal effect.
Click here for our Ninth Circuit Case which created new law under the Automatic Stay “duty to undo.” In this case, In re Leetien 309 F3d 1210, the creditor ended up paying significant money since they simply failed to abide by our request to dismiss a lawsuit within three weeks.
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At Doan Law our Bankruptcy Attorneys will answer all your Chapter 7 and Chapter 13 Bankruptcy questions. Call us now to meet with one of our expert bankruptcy attorneys, at any of our San Diego Bankruptcy offices, call (760) 450-3333.
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