What Happens if a Creditor Tries to Collect a Debt During Bankruptcy?

By the time you reach the point of filing for bankruptcy, chances are you have had multiple creditors calling you regarding unpaid debts or even threatening you with lawsuits and wage garnishment. One of the beauties of filing for bankruptcy is the automatic stay. This automatic stay goes into effect as soon as the bankruptcy petition is filed with the court, and effectively puts a halt to all collection actions during the bankruptcy case.

However, what happens when a creditor violates this stay and tries to collect on a debt during bankruptcy?

The Automatic Stay

The automatic stay is just that: automatic. As soon as the petition is on record with the court, creditors and debt collectors are informed of the action and are told to stop collections actions against you. When you file for bankruptcy, you notify the court of all claims against you, listing all debts and creditors, so that these companies and individuals can be informed of the bankruptcy. If you do not list the debt collector or creditor on the filing, he or she will not be notified unless you personally tell them. If a collector does call after bankruptcy has been filed, you should inform him or her of the bankruptcy case. If you are represented by an attorney, this is a good time to pass along that information as well. Our law firm deals with creditors all the time for our clients, ending the harassing calls and helping you get a good night’s rest.

Violation of the Automatic Stay

If the creditor or debt collector persists on pursuing the collections action and violating the automatic stay, you have several options available to you. Many times, the initial violation of an automatic stay is a simple mistake made by the creditor who does not know about the stay. Many creditors will immediately fix the error once it is noted. However, if it is intentional and the creditor or collector does not stop the violation, you have the right to notify the bankruptcy court. The bankruptcy court can then sanction the collector if it is found to be willfully violating the stay. The violation is considered willful if the stay was in force and was violated, the collector knew of the case and ignored the order or failed to immediately correct the action, and the collector did this act intentionally.

Sanctions fall under the bankruptcy court’s power of contempt, since the collector is violating the court’s order. As a result, the debt collector can be ordered to pay fines, as well as attorney fees. Depending on the violation, the court may also order that the collector pay damages in the case.

If the collector continues to violate the automatic stay, you may also pursue a claim under the Fair Debt Collections Practices Act (FDCPA), the Fair Credit Reporting Act, and the state’s unfair trade practice laws. Speak with your attorney to see what type of legal remedies you have available to you in these situations.

Call me if you are having problems paying your debts. Having debt makes you stay up at night. It stresses you out. It ruins relationships. I went through it. Boldly, I mustered up the courage to call a bankruptcy attorney and I pressed the restart button in 2008. And even though ten years has passed since I made that decision to restart my life, I never forgot what it did for me and how it helped me start over.

It even inspired me and my law firm to become the largest filers of bankruptcies in the country and in the top two in Florida all from our offices in Orlando and Kissimmee. The Benenati Law Firm has eliminated nearly a billion dollars of debt for its bankruptcy clients, making the firm one of the top twenty filers of bankruptcy in the nation. Remember, we are local in your hometown. We make our hours convenient for our clients and offer free consultations on Saturdays (9:00 a.m. – 3:00 p.m.) along with our normal business hours throughout the week. Go to https://www.407bankrupt.com/ or call 407-777-7777 to set up a free private consultation and learn more information. Because Life Has a Restart Button.

If you have questions on this topic or are struggling with insurmountable debt, we advise sitting down with an experienced Orlando bankruptcy attorney for a free consultation- particularly if you are facing wage garnishment or have a collection lawsuit pending. A bankruptcy attorney can advise you as to all the options available to you and detail the pros and cons of each, giving you the best advise based on years of experience helping those in similar financial circumstances.