The decision to declare bankruptcy is not an easy one and many find themselves feeling overwhelmed or stressed by the decision or the process. In most cases, the stress is two-fold: financial stress and emotional stress. The emotional stress is often caused by, or at least exacerbated by the near constant reminder of debt from creditor calls and letters.
The Bankruptcy Code has within it a provision that often helps alleviate some of this stress once bankruptcy is declared: the automatic stay found in 11 USC § 362. The automatic stay places a mandatory stay, or pause, on collection efforts by creditors for claims that arose before the bankruptcy filing. The prohibition is broad and specifically prohibits a number of actions including making efforts to enforce a judgment that was obtained against the debtor for a debt and trying to enforce a lien against property of the debtor. The stay is often aptly described as granting the debtor some “breathing room.”
Of course, creditors don’t always behave as they should, especially when third-party collection agencies are involved. Creditors are notorious for overly aggressive tactics to collect a debt taken prior to an individual’s bankruptcy filing. This misbehavior is the reason for consumer protection laws like the Fair Debt Collection Practices Act. Unfortunately, the same is true after bankruptcy has been filed: not all creditors comply with the automatic stay.
So, what is a debtor to do when faced with a creditor that continues to try to collect a debt after the automatic stay is in place – often the very action the debtor filed bankruptcy to avoid? The bankruptcy code provides an enforcement mechanism in 11 USC § 362(k), which provides “an individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.”
In other words, if the creditor willfully violates the automatic stay, the debtor may have a claim for financial damages against the creditor. Because of this, even when they violate the stay, creditors are not likely to admit that their actions were “willful” and have in the past tried to argue that they didn’t mean to violate the stay, they simply made a mistake. In the 11th Circuit, where Florida bankruptcy courts are located, it’s not that easy for creditors to avoid liability. There is a two-part test for determining whether the creditor’s actions were willful. The creditor must (1) know that the automatic stay was invoked (i.e. know about the bankruptcy filing); and (2) have intended the actions it took that violated the stay. As far as intent, it is enough that the creditor meant to take the action it took, it does not need to intend to violate the automatic stay.
Actions for violation of the automatic stay are just one means of ensuring rights are enforced and protected during bankruptcy. The Jacksonville bankruptcy attorneys at Adam Law Group can help protect yours. .