The Bankruptcy Automatic Stay Injunction – A Powerful Tool for the Honest but Unfortunate Debtor
If you are being hounded by creditors with incessant telephone calls, you are seeing collection letters piling up, and you are having trouble seeing light at the end of the tunnel, fear not. The Bankruptcy Code offers you protection from debt collection efforts – a shield, if you will, from wage garnishments, checking account attachments, eviction proceedings, and the code can even prevent or reverse a utility company’s decision to discontinue your service. Once your case is filed with the court, the “Automatic Stay Injunction” takes effect, as the name posits, “automatically.”
This means that all creditors are “stayed” or “stopped” from any further debt collection efforts. If the creditor wishes to proceed with collection, the creditor must first obtain court permission after presenting a motion in open court to the presiding judge in your district. If the creditor fails to obtain prior court approval to proceed with collection efforts after being provided written notice of your bankruptcy filing from the court, and even oral affirmation from either yourself or your attorney, the creditor could be liable to you for civil damages. This means that you can turn the tables on your creditor, drag the creditor into court to compel an explanation as to why the creditor thought it prudent to disregard a court order. As I am sure you could imagine, this often does not go well for the creditor. In addition, not only can you be awarded actual damages for the annoyance, aggravation and emotional distress you suffered as a result of a blatant disregard of the automatic stay injunction, but the creditor will likely, in turn, even have to pay your attorney’s fees and possibly punitive damages!
As a practical matter, the only creditors that successfully bring forth motions for relief from the automatic stay are going to be foreclosing banks in connection with a residential home mortgage matter filed in state court. General unsecured creditors rarely, if ever, ask for relief from the stay, since those kinds of debts are ultimately going to be discharged once the case concludes.
The rights afforded to a debtor going through the bankruptcy process are powerful indeed. It should be noted however, that there are always consequences to filing for bankruptcy, including potentially losing valuable assets you may own, or having to pay back your creditors over a period of 36-60 months a certain percentage of what is owed. For more information on whether you could benefit from a bankruptcy filing and what the potential negative consequences could be, please feel free to contact our office by visiting our “contact us” page, or by calling (847) 596-7494.