The automatic stay in bankruptcy.
11 USC 362 provides debtors (people filing a new bankruptcy) an automatic and immediate stay from any creditor trying to collect a debt once the bankruptcy case is filed. However, it is important to notify any creditors who are a party to a Court collection matter as soon as the bankruptcy is filed. I do that by faxing the creditor’s attorney notification including the filing receipt from the bankruptcy case. The creditor/attorney is responsible for doing whatever is necessary to stop collections.
Once the creditor has been made aware of the filing, Section 362 provides penalties, including damages, if a creditor attempts any collection action. These actions include phone calls, letters, texting, emails and, of course, court actions. If the creditor had a pending wage or bank attachment and continued to take money after notice of the bankruptcy filing, that would be a violation of Section 362. Damages are actual out-of pocket costs incurred by the Debtor. That could be lost wages for Court appearances, attorney’s fees for the action, any amount attached, phone calls, etc. Recent cases have confirmed that actual damages can include cell phone charges for minutes spent by the creditor’s calls.
Collection of unpaid debts, especially credit card debts, is a big business in the U.S. These big businesses will often attempt to defend contempt actions for violation of Section 362 by saying that they tried to stop collection actions as quickly as they could, but they are a big operation and that took weeks. That’s not good enough according to the Courts. In fact, a U.S. Bankruptcy Court ruled that a computer generated notice of collection sent days after notice was received by the creditor was a willful violation of Section 362.
It is important to keep a log of calls or letters received from creditors listed in your bankruptcy case after it has been filed. If a Court action is required to stop the creditor, proof of the violation of Section 362 will be required.
Ronald R. Stanley, Esq. has assisted individuals file Chapter 7 and 13 Bankruptcy for over 40 years. He is a member of the bar in Ohio (1974), Northern Ohio Federal District Court (1974) and 6th Circuit Federal Appeals Court (1977). 3637 Medina Road #5 in Medina, Ohio 44256, 330-952-1415 Phone, [email protected] email, rstanleylaw.com website