When you file for bankruptcy, an automatic stay goes into effect. This legal protection prevents creditors from pursuing collection activities against you. However, some creditors may still attempt to collect debts. When they do, they knowingly or unknowingly violate the automatic stay.
Understanding the consequences of such violations is essential. Doing so lets you know what to expect if you find yourself in this situation.
Willful violations of the automatic stay
A willful violation occurs when a creditor knows about your bankruptcy filing but deliberately continues collection efforts. For example, if a creditor receives notice of your bankruptcy yet proceeds to repossess your car, it may be a willful violation.
Courts may treat these violations more severely. They may often impose harsher penalties to discourage such behavior.
Consequences for creditors
A creditor who violates the automatic stay on purpose can face serious repercussions. Below are the potential consequences:
Monetary damages
You may qualify for compensation for actual damages incurred due to the violation. This may include expenses related to legal fees, lost wages and emotional distress.
Punitive damages
Courts may award punitive damages to violators. This may help deter future misconduct in cases of egregious violations. These damages can be substantial and will punish the creditor for their actions.
Contempt of court
Couts may hold creditors who willfully violate the automatic stay in contempt of court. This may result in fines or sanctions. It may even lead to imprisonment in extreme cases.
Attorney’s fees
The court may order the creditor to pay your attorney’s fees for addressing the violation.
It is important to note that not all violations are intentional. In some cases, creditors may not be aware of your bankruptcy filing. However, once notified, they must immediately cease all collection activities.
If you experience a violation of the automatic stay, consider consulting an attorney. They can help you take the necessary steps to protect your rights and seek appropriate remedies.
The automatic stay is an effective tool to provide breathing room during bankruptcy. Understanding your rights and the consequences for those who violate them can help you confidently navigate this challenging time.