Personal Injury Lawyer

Bankruptcy and the Automatic Stay

When you file for bankruptcy, an automatic stay goes into place to stop creditors from pursuing collection activities against you. The stay applies to almost every kind of collection activity, including legal proceedings, wage garnishments, and contacts by mail or phone. If a collection attorney violates that stay and continues to pursue you, they may be breaking the law.

Exceptions to the Bankruptcy Stay

The stay has broad powers but does include some limitations. If a collection attorney contacts you, consider whether the action may fall into one of these exceptions.

• It does not stop criminal cases.
• Some but not all child support actions are not subject to the stay.
• The bankruptcy stay does not stop all kinds of eviction cases.
• The stay does not apply to debts you incur after your bankruptcy is filed.

If these exceptions don’t apply, and a bankruptcy court hasn’t made any changes to the stay, the collection activity may be an illegal violation of the stay.

Options in Case of a Violation of the Stay

The first step to take if a collection attorney violates the stay is to tell the creditor about the bankruptcy. Sometimes, the collection attorney is unaware of the stay. Notifying the lawyer may be enough to stop the activity and reverse any actions taken.

If the first step doesn’t work, you should notify the bankruptcy court. The judge can issue sanctions for contempt of a court order against collectors that don’t honor the bankruptcy stay if the collection attorney is willfully violating the order. To prove willfullness, you must show some specific facts.

• You must show that the automatic stay was in place and that the collection attorney violated its conditions.
• You must prove that the collection attorney knew about the stay and ignored it or didn’t correct actions taken.
• You must demonstrate that the collection attorney’s actions were intentional. You don’t have to show that the collector meant to violate the stay, only that they knowingly started or continued to collect a debt in violation of the order.

Contempt of court may involve fines, payment of the debtors’ attorney fees, and other damages.

If all else fails, you may need to file a lawsuit to stop the collector’s activities. Your attorney can investigate whether the collection activities violate other state and federal laws, including the federal Fair Debt Collection Practices Act, the Fair Credit Reporting Act, and their state corollaries.

Getting Help

If you need help dealing with a collection attorney who is violating the bankruptcy stay, contact a knowledgeable and experienced attorney, like a bankruptcy lawyer in Memphis, TN, who is familiar with the state and local laws.

Thank you to the experts at Darrell Castle & Associates for their input into bankruptcy law.