While the Fair Debt Collections Practices Act and many other laws can protect debtors from creditor harassment, the Bankruptcy Code affords debtors the most immediate and complete relief in stopping collection calls and creditor harassment. Upon filing for relief under the Bankruptcy Code, one of the most important benefits goes into effect automatically, the Automatic Stay. The Automatic Stay stops all actions of creditors to collect any debt or take any action to collect a debt. Your creditors will get a notice from the court requiring them to stop collections.
However, even if they don’t have formal notice yet, any actions that they take may be invalid if done after the filing of the bankruptcy. If the creditor has actual knowledge of the bankruptcy even by the debtor just telling the creditor that he has filed bankruptcy and providing the case number, they must cease all collection activities. If the creditor continues to willfully violate the Automatic Stay, the debtor can recover actual damages, attorneys’ fees, and costs as well as possible punitive damages. Courts are reluctant to assess damages unless that debtor can prove an actual damage, but they may hold the creditor in contempt and order attorneys’ fees be paid.
The mere sending of a letter to the debtor may be sufficient to rise to the level of a violation of the Automatic Stay. Debtors should always alert their attorney if they receive any communication from a creditor after the filing of their case. In one case, a skilled eviction lawyer proceeded with an eviction claiming that he wasn’t trying to collect a debt only trying to evict the tenant. So the automatic stay did not prevent him from kicking the tenant out of the apartment when he was behind in the lease payments. The court found that the lawyer knowingly violated the automatic stay since the chapter 13 we filed allowed the debtor to bring the back rent current under the plan. When the lawyer pleaded his case to the court, the judge said that his filed documents were an admission of the violation of the Automatic Stay and the only issue left to decide was how much attorneys’ fees and sanctions he would have to pay to the debtor and his attorney.
While the Automatic Stay is a very effective tool, there are a number of actions that it will not stop. Those typically are in the area of domestic relations. The divorce courts still have power to set current support obligations and determine custody and visitation. You should speak with an attorney at Urban & Burt, Ltd. about any domestic relations issues as we have attorneys that concentrate in the area of divorce and domestic relations who can assist in using the bankruptcy code to resolve many support issues.