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11 U.S.C. 362 Intended to Keep Creditors at Bay; When it Doesn't, You Need a Lawyer

June 15, 2012

One of the prime protections of a Chapter 7 bankruptcy is what is called the automatic stay. phone.jpg

Orange County Bankruptcy Lawyer Vincent Howard knows that under 11 U.S.C. 362, this measures is intended to provide immediate relief from the incessant harassment of creditors. It's intended to give you some room to breathe, some time to sort through your financial affairs.

Once you receive a bankruptcy discharge, that stay becomes permanent. This measure is also underscored in the Fair Debt Collection Practices Act.

However, banks and other creditors don't always play fair. This is where it's going to become critical for you to have knowledgeable legal representation.

In fact, one case out of Florida proved this. The case, In re: James and Shannon Humphrey, the U.S. Bankruptcy Court for the Middle District of Florida, the bankruptcy judge fined Bank of America $10,000 for violating these basic tenants. Truthfully, that's a drop in the bucket for this mega-bank, which may point to the need for legislative measures to bolster these types of sanctions.

However, it's unlikely these two would have received any relief at all without the assistance of an aggressive attorney.

According to the court documents, the couple filed for a Chapter 7 bankruptcy, which granted them that right to an automatic stay. Bank of America did not request any relief from that automatic stay, or in other words, they didn't seek permission from the court to continue their collections with regard to this couple's debt. That means, by law, the bank was required to cease and desist.

The couple was granted their bankruptcy discharge in January 2011. That would have made that billing prohibition permanent. The bank was notified of this.

Subsequent to that action, this pair received nearly 40 phone calls from the bank regarding their debt - debt that had been cleared in the bankruptcy.

When the couple informed the callers that the debt had been discharged, the bank agents said they did not care and the calls would not stop until the couple contacted the bank's bankruptcy department so that the bank could update its computer system.

The couple's attorney sent certified letters to the bank, which it did receive. And yet, the calls didn't stop.

The case was taken back to court. The bank didn't bother to show up, and the judge ruled in favor of the plaintiffs, awarding the couple $10,000, plus another $2,500 for attorney fees.

Cases like this are inevitably going to continue to crop up across the country, especially because Bank of America, and others, don't appear to be changing the way they do business with regard to bankruptcy collections. Just take Capital One, which had to refund some $2.35 million that it had illegally collected from some 15,500 people for debt that had already been discharged by bankruptcy. (Note This is the same company that received a $3.5 billion bailout from the federal government four years ago.) Similar rulings have been filed against JP Morgan Chase in four separate bankruptcy courts.

If you're still being hounded by creditors after having filed for bankruptcy or having your debts discharged by bankruptcy, you need to contact an attorney who will fight for you.

Orange County Bankruptcy Attorney Vincent Howard at Howard Law can help. You can reach us toll-free at 1-800-872-5925 or send us a message online.

Additional Resources:
Aggressive Debt Collection -- Who's in Your Wallet? , By Richard Gaudreau, The Huffington Post

More Blog Entries:
Los Angeles Bankruptcy Can Help With Ballooning Credit Card Debt, June 2, 2012, Orange County Bankruptcy Lawyer Blog