- posted: Nov. 15, 2025
- Bankruptcy
The automatic stay is one of the most critical protections provided to debtors who file for bankruptcy under the United States Bankruptcy Code. As soon as a bankruptcy petition is filed, Section 362 of the Bankruptcy Code imposes an automatic injunction — known as the "automatic stay" — that immediately halts most collection efforts, lawsuits, garnishments, repossessions, foreclosures, and creditor harassment. This stay is designed to give debtors a necessary "breathing spell" from creditor actions, provide the bankruptcy court with control over the debtor’s estate, and ensure all creditors are treated fairly within the bankruptcy proceedings.
The automatic stay stops most creditors from pursuing collection activities. This means wage garnishments must cease, foreclosures are paused, utility disconnections are stopped, and lawsuits related to debt collection cannot proceed without express permission from the bankruptcy court. The stay not only relieves the immediate financial pressure on debtors, but also helps the bankruptcy process move forward in an orderly and equitable way.
Creditors violate the automatic stay when they continue or initiate collection activities after the bankruptcy petition is filed. Examples of such violations include:
Sending collection letters or making phone calls seeking payment on a discharged debt.
Continuing or starting lawsuits in pursuit of payment.
Garnishing wages after notice of the bankruptcy.
Repossessing vehicles or foreclosing on homes.
Cutting off utility services for unpaid bills included in the bankruptcy.
Reporting late payments or defaults to credit bureaus that should not be reported post-filing.
Some violations may happen because the creditor was not informed about the bankruptcy. However, once a creditor is notified, they must immediately cease all prohibited actions.
A “willful violation” of the automatic stay occurs when a creditor knows about the bankruptcy filing (or should know, given the circumstances) and intentionally continues collection activities regardless. It is not necessary for the debtor to show that the creditor had specific intent to violate the stay—just that the creditor's actions were deliberate and that they had knowledge of the bankruptcy.
If a creditor is found to have willfully violated the automatic stay, the debtor is entitled to several forms of relief under Section 362(k) of the Bankruptcy Code:
Actual damages — The debtor can recover compensation for specific losses directly caused by the violation. This may include lost wages if the debtor had to take time off work to deal with the violation, costs for recovering property wrongfully seized (like getting a car back from repossession) or fees to restore disconnected utilities.
Punitive damages — If the creditor’s actions were particularly egregious, reckless or blatant in ignoring the bankruptcy protections, the court may award punitive damages to penalize and deter such behavior in the future.
Attorney’s fees and costs — The creditor may be required to pay the debtor’s reasonable attorney’s fees and legal costs that arose from pursuing the matter in court. This ensures that debtors are not financially burdened by the process of enforcing their rights.
If you encounter any creditor communication or action that seems to defy the automatic stay, your bankruptcy attorney can assess the situation, determine whether a violation has occurred and assist you in taking the proper course of action to protect your legal rights and hold the creditor accountable.
At Marlin Branstetter Attorney at Law in Anaheim, I deliver effective legal support to Californians living with unmanageable debt and considering bankruptcy. Call me at 714-276-8589 or contact me online to schedule a free initial consultation.
