When a Debtor files a Bankruptcy Petition, the ultimate goal is to obtain a Court Order called Discharge of Debtor. This may take only a few months under a Chapter 7 “no asset” case or up to five years in a Chapter 13 repayment case.
But except for certain non-dischargeable debts, the Discharge of Debtor “operates as an injunction against the commencement of continuation of . . . an act to collect, recover or offset any such debt as a personal liability of the debtor.”
Unfortunately, some creditors, out of ignorance or spite, ignore the discharge injunction and continue collection activities, including calling, harassing, suing, or attempting to garnish wages or bank accounts of the debtor, or even seize property of the discharged debtor.
Thankfully, bankruptcy law provides a remedy for this abuse by creditors. When the discharge injunction has been ignored or violated by prohibited actions by the creditor, the debtor can re-open the bankruptcy case and seek an order of civil contempt and sanctions against the creditor.
If the bankruptcy judge finds that the creditor has intentionally violated the discharge injunction, the judge can order the creditor to pay actual damages (money), including damages for significant emotional distress and humiliation. In addition, the judge can order the creditor to pay debtor’s attorney’s fees and court costs. And in the case of a willful violation, the judge can order the creditor to pay punitive damages (large amounts of money) to the discharged debtor.
With knowledge of the significant financial risk of pursuing discharged debtors, most creditors abide by the discharge injunction and close their collection files. As to those who continue to pursue collection against the discharged debtor, many of these actions are done by ignorant individuals who don’t understand the law, don’t have a lot of assets themselves and are unlikely to be severely penalized for their misconduct.
But in the event that a creditor keeps calling, especially a business creditor that should know better, you are strongly advised to contact a good bankruptcy attorney who can take swift action to stop this abuse by creditors and request an order of contempt and sanctions.
Greg Martucci is good bankruptcy attorney with over 30 years of experience representing debtors. Call the Martucci Law Office at 630-980-8333 to learn more about remedies for debtors under the Bankruptcy Code and to schedule your FREE initial office consultation.