Doing nothing can also violate the automatic stay

On Behalf of | Apr 16, 2020 | Bankruptcy

In a Texas bankruptcy, once the filing is made with the court, everything is frozen in place. This is what is known as the automatic stay, and courts take it very seriously. While taking steps to initiate collection of debts is forbidden, one creditor found out that not stopping their efforts to collect that were already underway before bankruptcy can also violate the automatic stay.

In this particular bankruptcy case, the debtor owed his previous lawyer money. When the debt was unpaid, the lawyer undertook a collection action which resulted in the garnishment of the debtor’s wages. Then, the debtor filed bankruptcy, which triggered the automatic stay. The bankruptcy lawyer requested that wage garnishment stop but the creditor refused. The bankruptcy court found that the creditor was in contempt of court for not stopping the preexisting wage garnishment.

This shows that the automatic stay goes beyond affirmative actions that are taken after the bankruptcy filing. A creditor can violate the automatic stay even by doing nothing and refusing to stop something that was previously occuring before the bankruptcy case was filed. In this case, the debtor’s rights were violated simply because the wage garnishment continued because the court held that the bankruptcy filing should have been enough to stop it.

Bankruptcy courts have strict rules for both debtors and creditors that people may not necessarily know due to a lack of familiarity. While it takes a willful violation to be found in contempt of court, breaking these rules can have serious consequences. A bankruptcy attorney may represent the interests of a debtor or a creditor during the proceeding and can keep their client informed of the rules so that they can avoid unnecessary trouble. Bankruptcy proceedings can be challenging and might benefit from the assistance of counsel throughout the process.