Dallas,TX (PRWEB) December 01, 2011
Allmand Law has recently noticed an increased number of creditors violating the bankruptcy automatic stay despite the severe consequences of doing so. A recent bankruptcy case involved a debtor who was facing creditor harassment after they filed bankruptcy. The creditor refused to cease collection actions despite being aware of the fact the debtor had in fact filed bankruptcy.
“Ultimately, we were forced to file a lawsuit against the creditor due to their willful violation of the automatic stay,” said Allmand Reed the managing partner of Allmand Law. “Even after the bankruptcy, the creditor continued to attempt to collect on a debt that was accrued before the debtor filed bankruptcy.”
According to the bankruptcy code, a creditor is in violation of the automatic stay if they attempt to collect on a debt after the debtor has filed bankruptcy and has notified the creditor of that bankruptcy filing. With very few exceptions, all post-bankruptcy collections activities must cease unless the bankruptcy trustee approves a motion for relief from the automatic stay.
What Is An Automatic Stay Violation?
A debtor knows that they are experiencing an automatic stay violation when a creditor tries to collect on a post-petition debt despite their knowledge of the bankruptcy filing. According to Allmand Law, the bankruptcy courts have ruled that there is a difference between a simple clerical error and a willful violation of the bankruptcy automatic stay. If an automated collections letter was mailed to the debtor right after the bankruptcy filing, then this might be considered a simple clerical error. On the other hand, if a creditor called or attempted to seize the debtor’s assets after being made aware of the bankruptcy, this is a willful violation of the bankruptcy automatic stay.
A Second Chance For Creditors
The bankruptcy court is actually quite flexible when it comes to automatic stay violations in that they allow the creditor to correct their behavior. Once a bankruptcy debtor has experienced an automatic stay violation, their bankruptcy attorney will notify the creditor of their mistake and give them a chance to correct it themselves. However, if the creditor fails to correct their behavior after the bankruptcy attorney has warned them, then the bankruptcy attorney can go to the court and ask for stronger actions.
Punishment For Automatic Stay Violators
If a bankruptcy automatic stay violation reaches the court, the creditor can be liable to pay both actual and punitive damages along with attorney’s fees. If a debtor’s bankruptcy attorney is forced to file a lawsuit against the automatic stay violator, the creditor can expect that sanctions will be heavy depending on how much harm they caused the bankruptcy debtor.
Reed Allmand is Board Certified in Consumer Bankruptcy by the Texas Board of Legal Specialization, the managing partner of the law firm Allmand Law and NACBA’s State Chair for the Northern District of Texas. He has been practicing bankruptcy law for nearly 10 years and has handled more than 3,000 bankruptcy filings. Allmand has appeared on “Money for Breakfast” on Fox Business News and is the author of “The Truth about Bankruptcy.” To speak with Mr. Allmand or to schedule an interview, please call (214) 265-0123.
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