Your rights when faced with automatic stay and discharge violations
If you need to file bankruptcy, one of the greatest protections that you receive is the automatic stay. The stay protects you against creditors contacting you or using other means to collect the debt (e.g. lawsuits, foreclosure, etc.). Once bankruptcy is completed, you receive a discharge of many of your debts, prohibiting creditors from contacting you about them again. Although the stay and discharge are powerful tools, like any laws, they can be broken. Sometimes creditors willfully or accidentally violate the stay or discharge. What are your legal rights if this occurs?
Violations of stay
As soon as the automatic stay is in effect, your creditors must stop contacting you about your debt and commencing or continuing repossessions, garnishments, lawsuits, foreclosures or other means of collecting the debt you owe. If a secured creditor violates that stay (i.e. by taking back the collateral securing the debt), you have the right to ask the bankruptcy court to order the return of the property taken.
Additionally, you have the right to seek compensation against all types of creditors that violate the stay. Under the law, if the creditor knew or should have known that the automatic stay was effective at the time of the violation, you can recover any actual damages that you suffered because of the violation plus attorneys’ fees. If the violation was particularly extreme, you may also collect punitive damages and damages for emotional distress.
All creditors that violate the stay can also face contempt sanctions by the court, as the stay is a court order. Creditors that are sanctioned may be required to pay court costs and fines.
Violations of discharge
After you have completed the bankruptcy process, you receive a discharge of a significant amount of your pre-bankruptcy debts. Having received the discharge, you are no longer under a legal obligation to repay the debts. Unfortunately, some unscrupulous creditors are reluctant to let the discharged debts go and may attempt to contact you about them.
If this happens, you may have similar remedies as automatic stay violations. Since the discharge is a court order, creditors can face sanctions for contempt of court and be obligated to pay court costs and fines. Additionally, you may recover the attorneys’ fees that you paid to enforce your legal rights plus damages for any losses you suffered because of the violation.
An attorney can help
Fortunately, most creditors are not in the habit of violating the automatic stay and bankruptcy discharge. However, if you have the misfortune of encountering the few that are, it is important to immediately contact an experienced bankruptcy attorney. An attorney can ensure that the creditor is held to account for its violation of the bankruptcy laws.