The automatic stay is imposed, well, automatically,
upon the filing of any bankruptcy petition.
It is a big red STOP! sign to ALL creditors that debt collection actions, garnishments, foreclosures, repossessions, letters, phone calls, anything, must stop.
Most courts can issue a stay, an order freezing things where they are, after a lawsuit is filed, and there is notice to everyone, and a hearing.
In bankruptcy, the stay is automatic. With electronic filing,
the bankruptcy court is open all the time, 24/7.
It takes a while for the court to mail the official notices to creditors, but I always notify any lawyer or creditor who is chasing my client, as soon as I file the case.
Action taken in violation of the automatic stay can be, and usually is, undone.
The automatic stay can be lifted by the bankruptcy court, after a motion and notice to the interested parties.
The stay does not apply to some actions, like child support, but, contact an expert if you have a question on this issue.
What Happens When A Creditor Violates The Automatic Stay?
I’m glad you asked me that.
The automatic stay is an order of the bankruptcy court, which has the authority to enforce its order, by assessing damages, even punitive damages, and, attorney fees.
Bank of America found out the hard way (again) this week.
In further fallout from the worst acquisition in U.S. corporate history, Bank of (everything in) America’s purchase of Countrywide Mortgage, they royally screwed up handling a mortgage.
Bank of America started a multi-year “dual-tracking” game of cat-and-mouse. With one paw, Bank of America batted the debtors between about twenty loan modification requests or supplements that routinely were either “lost” or declared insufficient, or incomplete, or stale and in need of re-submission, or denied without comprehensible explanation but without prejudice to yet another request. With the other paw, Bank of America repeatedly scheduled foreclosures.
The created their problem by continuing, even increasing, their collection actions, even after the mortgagors filed bankruptcy.
BOA committed at least six further automatic stay violations by the end of August 2010 as it bulled forward, including ordering that the eviction of the Debtors begin.
On several occasions, BOA, with knowledge of the automatic stay, caused its agents to enter the Debtors’ gated community, sometimes on false pretenses, and lurk about the home. Without identifying themselves, they staked out the premises, tailed the Debtors, knocked on doors, knocked on windows, and rang doorbells, all to the terror of the family.
The court concluded that the actual stay violation damages are $1,074,581.50. The appropriate punitive damages are $45,000,000.00.
Hopefully, this will deter creditors from violating the automatic stay.
But this provision of the law was enacted in 1979, so, if they haven’t learned by now, well . . . .