Creditors giving money to debtors? Punitive damages and the automatic stay

Picture this: A creditor giving money to a debtor.

Sure, that’s about as likely as a slot machine giving you your money back.

Not so fast, though. There actually is a realistic scenario where you, as a debtor, could expect a creditor to pay money to you after your filing bankruptcy in Las Vegas. The scenario occurs when a creditor tries to collect money from an individual after the individual has filed for bankruptcy. Because as soon as a bankruptcy petition is filed with the court, the debtor is provided a legal “force field” protecting him or her from collection efforts by creditors.

Mind you, one of the keys is having a lawyer who takes all steps to make sure that your creditors have been notified that the automatic stay is in effect. But once they’re aware of your bankruptcy filing, a creditor is not allowed to make any attempt to collect money from you. They can’t use a collection agency, they can’t call you, they can’t send you anything, they can’t tell someone to tell you something. The only way they can contact you is by contacting your lawyer.

Well, actually, they can do all of these things if they really want. But if they do, then you can just let the court know and the creditor will likely be subject to punitive damages. The goal is to discourage creditors from contacting you directly and instead make sure that everything is resolved via the Court and the bankruptcy process. Because if a creditor tries to collect money from you after you’ve filed for bankruptcy, they’re not just harming you, they’re harming other creditors as well. And they’re harming the integrity of the bankruptcy process.

Despite the existence of punitive damages, however, many creditors do still try to collect from debtors after they have filed their case. They’re counting on debtors being uninformed and unaware and frightened.

But if you know the truth, that the bankruptcy process and the automatic stay are there for your protection, then you have power. And you can turn that power into money for yourself. Just tell the creditor thank you very much, save any information that could serve as evidence (e.g., the letter received, a phone record, perhaps a recording) and show it to your lawyer.

If the creditor was acting in violation of the automatic stay, then the Court can make the creditor pay money to you in the form of punitive damages.

This holds for any individual bankruptcy Las Vegas, whether Chapter 7 or Chapter 13 or even Chapter 11. And that’s why it’s important to have good bankruptcy attorneys in Las Vegas on your side.

If you need Las Vegas bankruptcy help, get in touch with us for a free consultation to make sure you’re fully aware of all of your rights in the bankruptcy process.