What Happens When a Creditor Violates the Automatic Stay?

Filing for bankruptcy protection is often the right solution for people faced with unmanageable debt. With the right guidance, a Chapter 7 or Chapter 13 proceeding might provide the long-term financial stability that you deserve. You also receive an immediate benefit that should make your life much easier. Once you file, the court issues an “automatic stay,” which is designed to halt all contacts from creditors, as well as punitive actions based unpaid bills, such as the cutoff of utility services.

In most cases, the automatic stay gives filing parties a much-needed pause while they work with their attorney to complete the bankruptcy process successfully. However, what happens if a creditor violates this automatic stay?  

There are many ways in which a creditor can defy the provisions of the automatic stay, such as continuing to make collection calls, garnishing wages or repossessing property. These actions are illegal once the automatic stay is in place, but debtors must be proactive in order to have sanctions levied against the violators. 

Under the Bankruptcy Code, debtors possess the right to sue creditors for violations of the automatic stay. To succeed, you must demonstrate that the violation was willful. This means you need to prove that the creditor knew about the bankruptcy filing and the automatic stay but proceeded with the prohibited action regardless. Potential remedies include the following:

• Actual damages — Any financial loss directly resulting from the violation, such as lost wages or costs incurred from recovering property that was wrongfully seized, or re-establishing services that were cut off. 
• Punitive damages — These serve as punishment for the creditor, especially if the refusal to honor the automatic stay order was particularly blatant or egregious.
• Attorney’s fees and costs — The law obligates the creditor to cover your legal expenses incurred from bringing the violation to court.

If you face any form of creditor harassment, even an outwardly friendly call or communication, after filing for bankruptcy, consider it as potential evidence of an automatic stay violation. Notify your attorney immediately and discuss what type of corrective action you should take. 

Jeff Field & Associates represents Georgia residents in bankruptcy matters. Please call 404-381-1278 or contact us online to schedule a consultation regarding your particular needs. Our offices are in Douglasville, Gainesville, Bogart, Lawrenceville, Marietta and Decatur.