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Automatic Stay Violations in a Bankruptcy Filing

Automatic Stay Violations in a Bankruptcy Filing
"Since 2005, when the bankruptcy code was modified, the U.S. Bankruptcy Court system has seen a steady increase in the number of individuals petitioning for bankruptcy. Prior to the implementation of the modification, approximately 500,000 individuals filed for bankruptcy each year. This has risen to over 1.5 million since 2010's beginning. Up to this point in 2011, it has been steady and comparable to 2010. There has been a significant increase in automatic stay violations as the number of bankruptcy filings has risen.

It appears that some creditors are unwilling to comply with court orders to cease debt collection efforts. With so many consumers having their rights violated during a bankruptcy petition, suing creditors for automatic stay violations has become a specialized area of practice for bankruptcy attorneys. Due to the expense of the bankruptcy attorney's time in preparing the case, the debtor will petition the court to compel the creditor to pay their legal fees. This encourages debtors who are already overburdened to pursue legal action against aggressive creditors. Restoring the bite to a bankruptcy petition by making an example out of these debt collectors who disobeyed a court order is equivalent to giving it fangs.

Recent court decisions have held that the debtor may only recover legal fees to the extent that they were incurred enforcing the automatic stay, and not for the litigation of damages. This decision overturned a 1997 precedent that stated a debtor could recover bankruptcy attorney fees in the prosecution of an automatic stay violation. Will this subsequent decision from the Circuit court prevent debtors from pursuing claims where there are no attorney fees available to pursue damages? In most instances, the prosecution of a violation of the automatic stay in a bankruptcy filing can be handled through a motion. Due to this, a bankruptcy attorney may substitute a portion of the fees with a contingency fee based on the ultimate award.

The majority of the bankruptcy attorney's labor consists of enforcing compliance with 11 USC 362 on the creditor. Attorneys spend few man-hours determining the amount of damages to be awarded. The reason why creditors commit so many flagrant violations of the automatic stay is because they are unfamiliar with bankruptcy law and, in many instances, believe that the automatic stay does not apply to their situation. Consequently, the creditor will promptly cease violating the automatic stay following the initial consultation with a bankruptcy attorney.

The enforcement of the automatic stay exposes creditors not only to attorney fees in the damages phase of the case, but also to coercive sanctions by the bankruptcy court. When this is added to the bill for creditors' defense, the total cost can reach the tens of thousands. The majority of the time, creditors concur with an attorney representing a client who has filed for bankruptcy before it becomes costly for them.""

" - https://www.affordablecebu.com/

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"Automatic Stay Violations in a Bankruptcy Filing" was written by Mary under the Finance / Wealth category. It has been read 81 times and generated 0 comments. The article was created on and updated on 01 June 2023.
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