Inherent in the filing of chapter 7 is an automatic stay which comes into life right after the filing of chapter 7 petition. Creditors are notified officially of the automatic stay in the notice of meeting of the creditors. However, this notice is not mailed sometime many days after and meanwhile the collection activities continues. The other problem is that when it is mailed, it only goes to the creditors listed in the schedules. Sometimes the creditors keep on changing names, addresses, and even entities when they sell their debtors to other collection agencies. Also, landlord and other entities whom no debt is owed, are not informed. Sometime the unsophisticated creditors does not understand the implication of the automatic stay.
Well, the only solution is for the debtor’s attorney to send them direct mail, or additional notices of the stay. This notice should be sent by certified mail
Action taken in violation of the stay are void.
It has been a long time view that actions taken in violations of the stay are void. This includes foreclosure, sales, collection, lawsuits and judgments. This rule applies whether or not the violator acted with the knowledge of the stay.
Courts have the power to undo violations of the stay by injunctions. The Bankruptcy Code in section 362(k) contains a specific cause of action against a creditor who causes injury to an individual by a wilful violation of the section 362 stay. A wilful violation is one committed knowingly. Even if a violation is done innocently, a refusal to rectify or failure to act affirmatively, is a violation. In such cases, section 362(k) provides for actual damages, costs and attorneys fees as well as sometime punitive damages.
In addition to remedies, under Section 362(k), the debtor also has remedies for violation of the automatic stay as contempt of a court order. Contempt sanctions can be imposed regardless of whether the violation is in willful disregard of the stay. So long as the enjoined party knows of the stay, it is responsible for the consequences.