Bankruptcy Stay means “Stay”!

Ever wonder what would happen if you continued collection efforts either during a bankruptcy case or after a discharge was issued?  Your lawyer will tell you it is not wise to ignore the automatic stay, but have you ever been tempted?  A creditor in a current Chapter 11 in the Eastern District of North Carolina decided to test the stay.  I am guessing at this point he is wishing he had not.

The creditor was a bit miffed at the debtor.  So, post-petition, the creditor created a Facebook page in the debtor’s name and invited the debtor’s friends, family and business acquaintances to “friend” the site.  He then called out the debtor for not having re-paid the substantial debt, for trying to hide behind the bankruptcy and reminded the debtor that he still owed the debt.

Having been reminded by debtor’s counsel that the stay was in place and that he needed to cease and desist all collection activities, the creditor stepped up his game by emailing the debtor and others regarding the balance due and owing including threats of “exposing” the debtor if payment was not made.

The court heard a Motion for Sanctions filed by and on behalf of the debtor.  In a written order/opinion, Judge David Warren of the United States Bankruptcy Court for the Eastern District of North Carolina ordered the creditor to pay $10,000.00 from which the debtor’s attorney will recover the actual attorney’s fees expended by the debtor and the rest will go to the debtor and presumably the debtor’s estate.

And, in case you are wondering, if the creditor fails to make the payment in the time stated in the order, then the court will send the U.S. Marshals to pick up the creditor and deliver him to the court to show cause why he should not be held in contempt and deposited in jail.

The automatic stay found in the Bankruptcy Code really does mean that you may not continue collection efforts.  And the court WILL enforce it.  Caveat emptor!