If you have fallen behind on your debts, you are likely dealing with the seemingly endless cycle of harassing calls and letters from creditors. One of the immediate benefits that filing for bankruptcy can provide is the “automatic stay,” which is an injunction that takes effect the moment the bankruptcy is filed. The injunction prevents creditors from attempting to collect on their debts, and is codified in section 362 of the United States Bankruptcy Code, 11 U.S.C. section 362. The types of collection activity prohibited by the automatic stay include:
· Suing a debtor to collect a debt
· Placing a lien on a debtors property
· Setting off indebtedness
· Collection calls or letters
· Bank levies
Certain creditors are exempt from the automatic stay, such as secured creditors who have an interest in a single piece of real property. An example of this type of creditor is the lender on a mortgage loan. In such cases, the individual filing for bankruptcy must either introduce a plan that has a reasonable chance of being accepted in a reasonable amount of time, or pay interest on the fair market value of the property at the current interest rate. Other types of creditors that may be exempt from the provisions of the automatic stay are landlords who are trying to evict tenants. Any eviction judgment awarded against the tenants may be enforced even after the tenant files for bankruptcy. In addition, a landlord may pursue eviction proceedings after a tenant files for bankruptcy if the landlord is attempting to evict the tenant due to the use of illegal substances or if it involves “endangerment” of the property.
A creditor may be liable for damages if they willfully violate the injunction. Actions taken by the creditor to collect on the debt are void, meaning that any attempt to repossess of foreclose on property will be ignored or reversed by the court. For example, if a creditor repossessed a car after the debtor filed for bankruptcy, the debtor could petition the court to require that the creditor return the vehicle. If a creditor willfully violates the automatic stay the debtor could can sure for punitive, actual, or damages if such damages occur as well as attorney’s fees. Furthermore, a creditor who violates the automatic stay may be held in contempt of court, and be subjected to additional sanctions.
If you have fallen behind on your bills and are facing the relentless collection attempts of creditors, bankruptcy may be an option you may want to consider. By filing for bankruptcy, you can immediately stop the collection efforts of creditors and start rebuilding your financial future. The Westbrook Law Group practices exclusively in bankruptcy and is conveniently located in downtown St. Charles, with a satellite office is Troy, Missouri. To schedule a free consultation, call us today at (636) 493-9231, or fill out our online contact form here and a member of our staff will be in touch with you shortly.