What happens if an automatic stay is violated?

On Behalf of | Aug 4, 2021 | Chapter 7 Bankruptcy |

If you file for bankruptcy in North Carolina, you will typically receive an automatic stay of creditor collection activities. However, this doesn’t mean that your creditors will abide by the terms of the stay. Take a closer look at what may happen if a violation occurs.

Was the creditor aware that you filed for bankruptcy?

Typically, large financial institutions have systems in place that let them know when a debtor has filed for bankruptcy. However, smaller entities may not have these systems in place, so they may not know that you have filed for bankruptcy and that a stay has been put into place. In such a scenario, simply informing that entity about your case should be enough to put an end to requests for payment.

The penalties for willful violations of an automatic stay

In the event that a creditor knowingly violates a willful stay, you might be entitled to compensation. Your bankruptcy attorney may file a motion to obtain damages from the party responsible for the violation. If the judge rules in your favor, you may be able to receive punitive damages, reimbursement for attorney fees, and other compensation as allowed by law. However, it is important to note that a bank may be able to collect on a debt even after the stay goes into effect.

Filing for bankruptcy may provide you with the leverage needed to regain control of your finances. At a minimum, it might prevent a creditor from foreclosing on your home, repossessing your car, or taking other steps to satisfy an outstanding balance. An attorney may help ensure that your rights are respected throughout the legal process.