One of the most critical components of bankruptcy law is the “automatic stay,” which is written into law at 11 U.S.C. § 362, and applicable to all bankruptcy cases under Title 11. It is considered “automatic” because it immediately takes effect upon filing of a bankruptcy petition (unless you have filed multiple frequent cases).
Chiefly, it “operates as a stay, applicable to all entities, of . . . the commencement or continuation . . . of a judicial . . . or other action or proceeding . . . to recover a claim against the debtor that arose before the commencement of the case under this title.”
The automatic stay is what allows someone going through a bankruptcy the breathing room they need to reorganize and discharge their debts. It stops all collection actions (phone calls, demand letters, lawsuits, garnishments, etc.) unless they are for the reasons stated in 362(b). The common exceptions to the automatic stay include criminal law or family law matters (the best interest of children will almost always trump bankruptcy law).
As such, the automatic stay is commonly thought of as a shield to bankruptcy filers, protecting them from creditors rushing to the court house to sue them for money damages. But, can the automatic stay also be used as a sword?
Buried deep in 11 U.S.C. § 362 is clause (k), which provides “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.”
When Can Creditors Be Sued in Bankruptcy Court?
This means if a creditor willfully tries to collect money from you after your case is filed, they can be sued in bankruptcy court; and if it is determined they violated the automatic stay, the creditor is on the hook to pay for the bankrupt debtor’s costs and legal fees, as well as punitive damages which are tacked on to actual damages to punish the creditor for their illegal actions.
Once your bankruptcy is filed, the bills and collection actions by your creditors needs to stop right away. An experienced bankruptcy lawyer will know how to help you enforce your rights under the automatic stay, and if necessary, take the creditors to court and make them pay.
CALL NOW FOR A FREE STRATEGY SESSION FROM A MN BANKRUPTCY LAWYER AT LIFEBACK LAW FIRM
With the automatic stay, your relief can start immediately when you file a bankruptcy case. If you would like a free consultation about your options, please give me a call at 1-800-551-3292, or go on to https://lifebacklaw.com/ for more information. You will be happy you did.
