Philadelphia Bankruptcy Attorney Dan Mueller of Harborstone Law Group.

If you are struggling to pay your bills, call me for a free consultation. If creditors are harassing you, I can help you put a stop to it. Even if your home is in foreclosure, it may not be too late to save it. I will listen to you and help you find the answer that best fits your situation.

Harborstone Law Group represents consumers in bankruptcy and debt negotiation matters throughout Philadelphia, Montgomery County, Delaware County, Chester County, and Bucks County in Pennsylvania.

Post-Bankruptcy Harassment: Stopping Creditors Who Just Don’t Get It

Post-Bankruptcy Collections HarassmentIn most cases, when a debtor files for bankruptcy, creditors stop all contact with the debtor immediately.  Most creditors know that if they attempt to collect against a debtor after the bankruptcy is filed, they could find themselves in serious trouble with the court.  Of course, occasionally a creditor or debt collector just doesn’t get it and continues to try to harass or collect against the debtor. Fortunately, the Bankruptcy Code protects debtors against creditors who violate the rules.

The Immediate Protection or the Automatic Stay

When a debtor files a petition for bankruptcy, an injunction called the “automatic stay” (“the stay”) goes into place.  The stay prohibits creditors from, among other things, taking any action to “collect, assess, or recover” any claim that the creditor had against the debtor before filing.  18 U.S.C. § 362(a)(6); In re Wingard, 382 B.R. 892, 899 (Bankr. W.D.Pa. 2008).   All creditors receive a notice from the court informing them of the automatic stay.  However, as a practical matter, if a creditor has actual knowledge of the debtor’s bankruptcy in some other way, the creditor is presumed to be aware of the restrictions of the automatic stay.

Serious Consequences for Creditors Who Continue to Harass Debtors

If a creditor willfully takes an action that violates the automatic stay, the debtor may recover actual damages, attorney’s fees, and costs, and possibly punitive damages.  18 U.S.C. § 362(k)(1).  These damages may include compensation for emotional distress, if the creditor’s actions are serious enough.   In addition, the court may sanction the creditor for contempt, including imposition of fines and even jail time. 11 U.S.C. § 105(a).

Proving Willful Violations of the Stay

For a debtor to obtain damages, the creditor’s action must be willful.   A creditor’s violation is willful when the creditor violates the stay “with knowledge that the bankruptcy petition has been filed.” In re Wingard, 382 B.R. at 901 (citations omitted).  It does not matter whether the debtor intended to violate the stay. Rather, it is enough “that the acts which violate the stay be intentional.”  Id.  In other words, a violation is willful when the creditor knows about the stay and intended to act in the way that violated the stay.  For example, if the creditor sends a letter to the debtor that violates the stay, the creditor is still potentially liable for that letter, even if the creditor thought the letter did not violate the stay.

Courts take a fairly broad view of what actions violate the stay.  Even if the creditor does not demand payment but just pressures the debtor in some way, it may be a violation.  For example, sending a letter scolding the debtor for filing for bankruptcy or implying that the creditor can have the bankruptcy dismissed may land the creditor in hot water.  In fact, even actions that the creditor takes on the advice of counsel that violate the stay have resulted in an award of damages.

We will get into proving emotional and actual damages for violating the stay in a later post.  However, if you believe that a creditor has violated the automatic stay by continuing collection action after you have filed, be sure to discuss the matter with your bankruptcy attorney.

Dan Mueller of Harborstone Law Group, PLLC is a Greater Philadelphia Bankruptcy Attorney.  If you wish to discuss this post or have questions about Chapter 7 bankruptcy, Chater 13 bankruptcy, or debt negotiation, you can reach him at 215-248-0989.

2 comments to Post-Bankruptcy Harassment: Stopping Creditors Who Just Don’t Get It

  • Jackie

    Hello. I filed bankruptcy under Chapter 13, completed all the payments, and was discharged. Last week I received a two letters from a collection agency for one of the creditors listed in the schedules. This creditor was notified of the bankruptcy but did not file a proof of claim. Am I responsible for paying this debt? Thank you.

    • If a debt is dischargeable (i.e., not a student loan or other non-dischargeable debt), and the creditor was properly notified of the bankruptcy, any attempt to collect on the discharged debt is a serious violation of the bankruptcy discharge. In addition, it may be a violation of the federal Fair Debt Collection Practices Act, which may result in damages and attorney’s fees. Typically, if a debtor informs the creditor of the discharge, it will put a stop to the collection efforts. However, if the creditor continues to try to collect, it may become necessary to have an attorney intervene.

      Note that in Chapter 13, it is crucially important to give the correct address to notify the creditor. If the notice is returned because the address is incorrect, the debtor’s attorney must attempt to find the correct address and resend the notice to the creditor. If the creditor does not receive notice, the debt may not be discharged at the end of the Chapter 13 case. (In a no asset Chapter 7 case, the debt would normally still be discharged, even if the creditor did not receive proper notice.)

      Note also that if a creditor has proper notice of the Chapter 13 filing but does not submit a proof of claim, it cannot be paid through the Chapter 13 plan. It is just out of luck. Even if it files a proof of claim, the creditor is limited to whatever percentage that class of creditors receives in the plan. It does not get to claim anything else after the discharge. However, secured creditors still maintain their liens, even if they do not file a proof of claim (unless the liens are avoided in the bankruptcy). In addition, long-term secured debt survives the bankruptcy, unless the secured property is surrendered in the plan.

      I cannot advise you on your case. However, I suggest that you speak to your bankruptcy attorney about the matter.