When Creditors Violate the Automatic Stay
In most cases when a debtor files bankruptcy, creditors stop all actions against them, including lawsuits and garnishments. However, sometimes there are creditors who, either because of ignorance or stubbornness, violate the automatic stay. When that happens debtors may need to take legal action. But first let's talk about some things the debtor can do to avoid the situation in the first place.
How to Avoid Creditors Violating the Automatic Stay
The first thing a debtor should do is to make sure that they have listed all creditors in the bankruptcy petition and that all of the creditors are properly notified of the bankruptcy. Unfortunately, some creditors don't receive notice in time and go ahead with an adverse action such as garnishing a debtor's bank account or paycheck. If this happens it may be difficult to get the money back quickly, especially in the case of "mom and pop" creditors who may not understand bankruptcy law.
When the Creditor Refuses to Refund a Debtor's Money
If a creditor refuses to refund a debtor's money, then the debtor will need to file what's called a motion for violation of the automatic stay. This is not something the debtor wants to do alone. Filing a motion can be complicated and costly especially if the creditor decides to fight for the money they garnished. But there are some cases where the creditor returns the money once they receive notice that a motion against them has been filed in bankruptcy.
When a bankruptcy judge looks at possible automatic stay violations he/she is considering the timeframe and whether or not the creditor was properly notified of the bankruptcy filing and whether the creditor intentionally violated the automatic stay. If it is found that the creditor intentionally violated the automatic stay with no regard to the bankruptcy law, they can face sanctions.
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