Bankruptcy, The Automatic Stay And How To Enforce It

By Author: Charles Finn
Total Articles: 2
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One of the biggest benefits of filing for bankruptcy is the automatic stay. Upon submitting the bankruptcy petition, the automatic stay prohibits any creditor from seeking to collect a prepetition debt. The scope of the automatic stay is very broad. What is and isn't prohibited is specifically set out in 11 U.S.C. 362. However, generally speaking, the automatic stay prohibits the collection as well as the attempt to collect on a prepetition debt. The automatic stay is really a federal order prohibiting the collection or attempt to collect prepetition debts. Although there is an order barring creditors from attempting to collect prepetition debts, creditors frequently do make an effort to collect on prepetition debts throughout the automatic stay. A violation of the automatic stay is a serious matter. An intentional violation of the stay undermines the integrity of the whole bankruptcy process. Bankruptcy is intended to be a means in which creditors are paid and debts are handled in an organized manner. An intentional violation of the stay strikes at the heart of the process due to a creditor trying to collect a debt ...
... outside of the bankruptcy process. For that reason, the courts take a violation of the automatic stay very seriously.Violations of the automatic stay are typically punished by monetary sanctions. The intent necessary in order for the court to find a violation of the automatic stay is simply the intent to commit the act which violates the stay. The creditor does not need to intend to violate the automatic stay itself. This is a significant distinction that plays a large role as to the total of monetary sanctions that a debtor receives when the automatic stay is violated. When reviewing a violation of the automatic stay for potential litigation, numerous issues need to be thoroughly examined. Initially, it must be determined whether or not the creditor was appropriately noticed of the bankruptcy proceeding. This is a two step procedure. Initially it has to be determined that the creditor was correctly listed within the schedules and on the creditors matrix. Next, if the party was properly listed, it needs to be determined whether the party was noticed at the correct address. To do this, the debtor's attorney must check to determine that the notice sent to the creditor wasn't returned undelivered.After it has been determined that the party was properly noticed, the date of the violation must be definitely established. There will always be a delay between filing and notice. A technical violation in between filing and actual notice, while a technical violation, is probably not going to get an award of sanctions if the creditor stopped collection efforts upon receiving actual notice.Although it is sometimes not required, it is typically the best course of action to afford a creditor in violation of the automatic stay a chance to cure the violation prior to submitting a motion for sanctions. After a violation has been established an attorney will often write a letter to the creditor via certified mail, return receipt requested, informing the creditor of the violation, the dates, times and manner of the violation and allow the creditor a chance to withdraw demand for payment in writing. This is done in a good faith effort to resolve the issue without resorting to litigation. For certain egregious violations, this might not be a required step in obtaining an award of sanctions. An example would be filing a court case against a debtor with actual knowledge of the bankruptcy. On the other hand, for other types of violations, along the lines of collections letters, it is important towards establishing a blatant indifference to the Federal injunction.Michael A. Dye is a Bankruptcy Attorney located in Fort Lauderdale, Florida. The Law Offices of Michael A. Dye, P.A. is a debt relief agency and assists consumers filing for protection under The United States Bankruptcy Code. For more information, please call (954)745-5848 or visit the following website: Broward County Bankruptcy Attorney.