Creditor Harassment in Michigan After the Automatic Stay is Imposed
If you’re facing overwhelming debt and have filed for bankruptcy in Michigan, the automatic stay is one of the most powerful protections available.
Upon filing your bankruptcy petition, the automatic stay immediately halts most collection actions against you. The automatic stay gives you a much-needed break, allowing you to begin rebuilding your financial life without the constant pressure from creditors.
However, despite its legal force, some creditors may still attempt to violate the automatic stay, continuing their aggressive collection tactics or even initiating legal actions. This can leave you feeling confused, frustrated, and uncertain about your next steps. In Michigan, creditor harassment after the automatic stay is illegal and can have serious consequences for the creditor.
In 2023 alone, 18,922 bankruptcies were reported in Michigan. [1]
When Does the Automatic Stay Take Effect?
The automatic stay goes into effect immediately after you file your bankruptcy petition. As soon as your case is filed, creditors must stop their collection efforts. This provides instant relief from most types of creditor actions.
What Actions Are Covered by the Automatic Stay?
The automatic stay halts a wide range of creditor actions, including:
- Foreclosures: Stops home foreclosure proceedings.
- Wage Garnishments: Ends deductions from your paycheck.
- Lawsuits: It halts legal actions by creditors.
- Repossession: It may prevent creditors from taking back property.
- Eviction: This may delay eviction in certain cases.
The automatic stay gives you time to address your financial situation but ensures that creditors are notified and comply with the stay.
Creditor Harassment After the Automatic Stay
Despite the clear legal restrictions, some creditors may knowingly or unknowingly continue their collection efforts after being notified of your bankruptcy filing. Common violations include:
- Continued collection calls: Creditors may continue calling you to demand payment, even though they are prohibited from doing so.
- Lawsuits or judgments: Creditors may file lawsuits or seek judgments, ignoring the bankruptcy filing.
- Wage garnishments or bank levies: If creditors continue garnishing wages or seizing funds from your bank account, they are violating the stay.
- Repossession or foreclosure attempts: Creditors might try to repossess your vehicle or proceed with a foreclosure, even after the stay is in effect.
These violations can be stressful and frustrating, especially when you are already in a difficult financial situation.
Consequences for Creditors Who Violate the Automatic Stay in Michigan
In Michigan, if a creditor violates the automatic stay, you or your bankruptcy attorney can file a Motion for Sanctions in the appropriate U.S. Bankruptcy Court for your district (Eastern or Western Michigan). This motion asks the court to enforce the stay, stop the creditor’s actions, and award damages for any harm caused.
Once the motion is filed, the court will schedule a hearing to determine whether the creditor’s actions violated the stay and what penalties, if any, should be imposed.
Under Michigan bankruptcy law (which follows federal law), creditors who violate the automatic stay can be held accountable in several ways:
- Contempt of Court: A creditor who continues collection efforts in violation of the automatic stay can be held in contempt of court. This is a serious legal charge that can result in fines, legal fees, and other penalties.
- Fines and Penalties: The Michigan bankruptcy court can impose fines on creditors who violate the stay. These fines can include costs incurred by the debtor to address the violation, as well as penalties designed to punish the creditor for failing to comply with the law.
- Compensatory Damages: If you suffer financial harm, emotional distress, or other damages due to a creditor's violation of the automatic stay, the court may order the creditor to pay compensatory damages. This may include reimbursing you for legal expenses, lost wages, and emotional distress caused by the harassment.
- Punitive Damages: In cases of willful or egregious violations, Michigan courts may award punitive damages. These damages are designed to punish creditors who intentionally or maliciously violate the stay and deter them from future misconduct.
What You Can Do if Creditors Harass You After the Automatic Stay in Michigan
If you experience creditor harassment after filing for bankruptcy in Michigan, take immediate action to protect your rights. While the automatic stay provides powerful legal protection, creditors who ignore it can make your situation more stressful. Here are the steps you can take to stop creditor violations and ensure your bankruptcy case progresses smoothly.
1. Contact Your Bankruptcy Attorney Immediately
Reach out to a Michigan bankruptcy lawyer. They can guide you through the process of enforcing the automatic stay and taking action against creditors who are violating the law. Your bankruptcy attorney should have experience dealing with creditor harassment and can provide advice on the best course of action based on your situation.
2. Notify the Creditor in Writing
If a creditor is continuing collection efforts, notify them in writing that you’ve filed for bankruptcy and that the automatic stay is in effect. In Michigan, your bankruptcy lawyer can provide you with a Notice of Bankruptcy Filing to send to the creditor. This document serves as formal notice that bankruptcy proceedings have begun, and it should stop most creditor actions. If the creditor persists, the notice can serve as evidence that they were informed of the stay.
3. File a Motion for Sanctions
If a creditor continues to violate the automatic stay after being notified, you can file a Motion for Sanctions in the Michigan bankruptcy court. This motion requests the court to take action against the creditor for contempt of court and may include:
- Stopping the creditor’s collection activities.
- Awarding you damages, including legal fees, emotional distress, or lost wages.
- Imposing fines or other penalties on the creditor.
Your bankruptcy attorney can help you prepare and file this motion, and the bankruptcy court will schedule a hearing to determine if the creditor should be held in contempt.
4. Report the Violation to Regulatory Agencies
In addition to filing a motion in bankruptcy court, you can report creditor violations to the appropriate regulatory authorities. In Michigan, you can file complaints with:
- Michigan Department of Insurance and Financial Services (DIFS): This state agency handles consumer protection matters, including violations of bankruptcy protections.
- Federal Trade Commission (FTC): The FTC enforces consumer protection laws and can investigate abusive collection practices under the Fair Debt Collection Practices Act (FDCPA).
These agencies can take action against creditors who violate federal or state laws, including those related to the automatic stay.
5. Keep Detailed Records of the Harassment
Document every instance of creditor harassment, including phone calls, letters, or other collection attempts. Keep a log with dates, times, and the nature of the contact. Save any written communication, and take notes if you receive calls. These records will be necessary if you need to prove a violation of the automatic stay and seek damages or sanctions.
6. Stay Proactive in Managing Your Bankruptcy Case
While the automatic stay offers protection, remain engaged in your bankruptcy process. Ensure that all required documents are filed with the court on time, attend all hearings, and follow the guidance of your bankruptcy attorney. If creditors continue to harass you, staying proactive and involved in your case will help ensure that you are protecting your rights throughout the bankruptcy process.
Creditor harassment after filing for bankruptcy can add unnecessary stress, but remember that the automatic stay is there to protect you. If a creditor continues collection actions despite the stay, they are violating the law, and you have legal recourse.
If you are experiencing creditor harassment after bankruptcy, don’t hesitate – contact Frego & Associates in Michigan today to protect your rights and move forward with your financial recovery.
Source:
[1] The American Bankruptcy Institute. (2024a). Bankruptcy Filing Trends in Michigan. https://abi-org.s3.amazonaws.com/Newsroom/State_Filing_Trends/2024/Filing_Trends_Michigan.pdf
