The best part of filing bankruptcy is, it will stop the creditor’s harassment against debtor. No creditor can bother a debtor through phone calls, threatening letters, and lawsuits etc. As per the bankruptcy law, this is known as automatic stay. Read the FAQs to make yourself more knowledgeable regarding automatic stay violation in bankruptcy.
Yes. Debtor can claim against the creditors violation as per the federal debt collection laws, unfair trade practice laws, legal theory such as negligence.
Notice is very significant for creditors to get relief for violations. Because, they can claim that they didn’t get notification of the debtors bankruptcy filing. Then a creditor can’t entitled to damages against the debtor.
Creditors are not completely powerless after an automatic stay is imposed. If they want to resume the collection process, then they can file a motion for relief from Automatic stay at the court. If the motion is filed properly and the bankruptcy court approves it, then the automatic stay will be revoked. Creditors can resume the collection process once again.
Once the automatic stay is revoked, creditors can resume the collection process. This means they can initiate the foreclosure process or repossess your property. They can call you regarding payments. Fortunately, not all creditors file a motion for relief from the automatic stay. Moreover, creditors have to abide by state and federal laws. They can garnish your wage but only with a judgment order in their hands.
Usually, an automatic stay is imposed 30 days after the bankruptcy case is filed. Moreover, it doesn’t always safeguard debtors from all creditors. This is why creditors must file a motion in an individual case for imposing or continuing the automatic stay. Debtors have to pay a separate fee for this. Since everything must be done quickly and the judge has to preside over the case immediately, so it’s best to consult a bankruptcy attorney before filing a motion.
There are a couple of grounds based on which creditors can appeal for automatic stay revocation. Some of them are given below:
This means that the automatic stay is terminated and the property is out of the bankruptcy estate. As such, creditors are free to foreclose or repossess it following the state law. This usually happens when the debtor doesn’t file a statement of intention on whether or not he wants to surrender or redeem or affirm the property on time.
You should continue the home insurance and auto insurance policies. You should pay the insurance premiums even after the automatic stay is imposed. Once you stop paying the premiums, creditors will get an opportunity to file a motion at the court to lift the automatic stay and snatch your assets.
If you had 2 bankruptcy cases dismissed in the previous year and had filed a new one in the current year, then the automatic stay won’t be imposed. And, even if it's imposed, it stays in effect for only 30 days. In this situation, you have to file a motion at the court to extend the automatic stay.
The automatic stay can stop the eviction process only when:
The automatic stay is imposed on wage garnishments after you file bankruptcy. This means creditors can’t garnish your wage henceforth. However, if your wages are being garnished for paying child support, then the automatic stay can’t help in this scenario.
Yes. The automatic stay is imposed on the debt collection calls also. Creditors or debt collectors can’t call you for payments after the stay has been imposed.
It stops the foreclosure process, and this is probably why so many people file bankruptcy every year. However, the automatic stay won’t be imposed in the following circumstances:
The sale has already taken place.
You have one or more than one bankruptcy case dismissal in the previous year.
Sometimes, the federal courts remain closed due to unavoidable circumstances like pandemic even when your case is in process. In those situations, the automatic stay remains in effect. Creditors can’t make collection efforts during this period.
Usually, creditors can’t file lawsuits against the debtor once he has filed bankruptcy and received an automatic stay. However, if creditors want to file lawsuits outside bankruptcy, then they have to appeal and receive stay relief from the court. They have to give valid reasons behind why they want to file lawsuits outside bankruptcy.
Well, you have to prove 3 points before the court, and these are:
Bankruptcy doesn’t discharge all types of debts. For instance, private student loans. However, when an individual files bankruptcy, the automatic stay is imposed on the non-dischargeable debts too. However, once that stay ends, creditors can resume collection activity. The same rule applies to secured creditors.
Whenever you're filing bankruptcy, make sure you know about automatic stay violation and your rights very well. Otherwise, you may not be able to protect yourself against cunning creditors.