When a debtor files a bankruptcy case, the automatic stay comes into place. The automatic stay is a temporary injunction that requires most creditors to stop collection efforts against the debtor. Child support and spousal support creditors are excluded from the automatic stay.
The court will send notice to all the creditors listed in the debtor’s creditor matrix that the debtor has filed bankruptcy. Once a creditor receives notice, they are prohibited from contacting the debtor or initiating any actions. Common actions that are prohibited by the automatic stay and throughout bankruptcy include:
Initiating or continuing a lawsuit to collect a pre-petition debt
Initiating or continuing a foreclosure action
Initiating or continuing an eviction
Acts of repossession
Setoffs by creditors of certain debts
Disconnection of utility services
The automatic stay remains in effect until the case is dismissed, closed, or the debtor is discharged–unless a creditor requests and obtains court approval to continue its collection activities. Most of the time it is secured creditors, such as a car or mortgage lender, that requests for relief from the automatic stay. A typical reason for requesting relief is so the creditor can continue foreclosure or repossession actions when the debtor is behind on payments.
When a creditor files a request for relief from the automatic stay, a copy of the request is sent to the debtor and their attorney. The debtor and their attorney have 21 days to respond to the motion. If the debtor does not object or respond, the court will grant the creditors motion. If the debtor does object, a hearing will be set and both parties will have an opportunity to present their positions. Once the court grants the motion, the creditor can continue with foreclosure or repossession actions.
What happens to the creditor if they violate the automatic stay?
If a creditor continues its activities without court approval it may be in violation of the automatic stay. The debtor’s attorney notifies the creditor their actions are violating the stay and demands they halt current activities. If the creditor ignores this notice or continues to violate the stay, the debtor can file a motion with the court requesting sanctions for violating the stay. If the court determines the creditor willfully violated the stay, the debtor is entitled to recover damages, including costs and attorney’s fees.
If you have any questions about bankruptcy please feel free to contact our office. One of our consumer bankruptcy attorneys will be happy to go over things with you. We currently have bankruptcy offices in Wichita, Topeka, Lawrence, and Overland Park.