When you file for bankruptcy, the law provides powerful protections that immediately stop creditors from contacting you, filing lawsuits, garnishing wages, or pursuing collection activity. These protections — the automatic stay and the discharge injunction — are among the most important rightsafforded to a debtor under the bankruptcy code.
Unfortunately, not every creditor respects these protections. Some creditors continue to call, send letters, file lawsuits, or attempt to collect debts that have been legally discharged. When that happens, the bankruptcy code provides remedies — including sanctions, damages, and payment of your attorney's fees.
The Automatic Stay: Your Immediate Protection
The moment you file for bankruptcy, the automatic stay goes into effect. This debt collection injunction prohibits most creditors from taking any collection action against you. It stops lawsuits, wage garnishments, repossessions, foreclosure proceedings, and direct contact with you about debt.
The automatic stay prohibits creditors from:
- Calling you or sending collection letters
- Filing or continuing lawsuits against you
- Garnishing your wages or bank accounts
- Repossessing your vehicle or other property
- Foreclosing on your home
- Evicting you (subject to certain exceptions)
- Canceling or modifying insurance policies
- Reporting negative information to credit bureaus
The automatic stay remains in effect until your case is closed, dismissed, or the court lifts the stay. In a Chapter 7 case, this typically lasts approximately five to six months.
The Discharge Injunction: Permanent Protection
After your bankruptcy case concludes and your discharge enters, a second protection kicks in: the discharge injunction. This is a permanent injunction that prohibits creditors from ever collecting on debts that were discharged in your bankruptcy.
Unlike the automatic stay, which lasts only during your bankruptcy case, the discharge injunction lasts forever. If a creditor or debt collector attempts to collect a discharged debt five, ten, or twenty years from now, you can return to the bankruptcy court that entered your discharge for relief.
What Happens When Creditors Violate Your Protections
When a creditor intentionally violates the automatic stay or the discharge injunction, the bankruptcy court can impose severe sanctions. The court has broad authority to fashion appropriate remedies, which may include:
- Actual damages: Compensation for any financial harm you suffered due to the violation
- Statutory damages: Additional damages prescribed by the bankruptcy code
- Punitive damages: Additional compensation to punish particularly egregious conduct
- Attorney's fees: Payment of your attorney's fees for pursuing the violation
- Contempt of court: The creditor may be held in contempt for violating a court order
These sanctions can be significant. For creditors, the cost of violating a federal court order can far exceed the amount of the original debt.
Debt Collectors Who Buy Discharged Debt
The debt collection industry is massive, and some debt collectors have built a business model around purchasing debt that has already been discharged in bankruptcy. They buy this debt cheaply — often for pennies on the dollar — and attempt to collect it, knowing that some people will pay without realizing the debt is no longer legally enforceable.
This practice violates the bankruptcy code. At The Dellutri Law Group, we take these violations seriously. We do not tell our clients to simply ignore the problem or send a letter hoping it goes away. We investigate the conduct, pursue the available remedies, and hold debt collectors accountable for violating federal law.
Can We Help If You Filed With Another Firm?
Yes. If your bankruptcy was handled by a different attorney and that attorney is not interested in pursuing the violations, you have the right to seek representation from another firm. Many bankruptcy attorneys do not sue creditors on a regular basis and may tell you not to worry about it. But the problem often does not go away — the debt collector may sell the account to another collector, and the cycle continues.
We regularly represent clients whose bankruptcy was filed elsewhere but who need help enforcing their rights against violating creditors. Contact the Dellutri Law Group today for a free consultation.
