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Creditor Found in Violation of Automatic Bankruptcy Stay

A person in Oregon who files for a Chapter 7 bankruptcy can expect creditors to be issued an automatic stay. This requires creditors to stop actions against the debtor, including pursuing repossession or other actions to collect the debt. According to one bankruptcy court in Virginia, it also means that the creditor is obligated to stop any actions that are in motion.

In the Virginia case, the debts of a woman who filed for Chapter 7 included money she owed to the lawyer who represented her in her divorce. The lawyer had begun the process of garnishing her wages. A hearing had been scheduled, and the court was holding $1,000 that would be turned over to the lawyer. In the bankruptcy paperwork, the woman had listed the debt she owed to the attorney. The $1,000 was claimed as an exemption.

When the lawyer was told to stop the garnishment process, he said that he was not obligated to do so. The court found that he had willfully violated the automatic stay. This means that in the opinion of the court, the violation was both willful and damaging, and the attorney was found in contempt. However, the U.S. Supreme Court is due to rule on the question definitively in the summer.

When people file for Chapter 7 bankruptcy, there are a few other issues that may arise. For example, the bankruptcy may be delayed if the person does not fill out the paperwork correctly. An attorney may be able to help by explaining the process and helping the person complete the documentation correctly. The person is usually allowed to keep some assets, and most debts may be discharged except for a few that do not qualify, such as child support payments and most tax debts and student loans.