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Automatic stays and emotional distress damages

Illinois residents who file for personal bankruptcy may be able to obtain actual and punitive damages if they are harmed by the purposeful violation of the automatic stay that is set in place when bankruptcy is filed. However, there is a question whether the actual damages they receive should include damages for emotional distress.

The courts have determined that the intent of the automatic stay in the bankruptcy process is to allow the debtors to have a period in which the collections efforts against them are ceased and to stop harassment. The stay is also meant to provide debtors relief from the financial stresses that brought them to bankruptcy.

When Congress enacted the provisions of the bankruptcy code that pertained to the stay, it attempted to provide a form of protection for debtors from financial loss as well the psychological and emotional pressures that the violations of a stay can induce onto debtors. Based on the policy that forms the foundation of the stay, the harm that occurs to non-financial interests may meet the requirements for actual damages.

Four of the circuit courts have determined that emotional distress damages may be counted under purposeful violations of the automatic bankruptcy stay. When making their determination, the courts reevaluated the legislative background and found that financial loss and both the psychological and emotional consequences on debtors that resulted from the violation of the stay were the focus of Congress.

An attorney who practices bankruptcy law may advise clients with substantial debts how filing for personal bankruptcy might provide them debt relief. Clients with a steady stream of income may be advised how Chapter 13 bankruptcy can be used to make affordable payments on debts or whether they qualify for Chapter 7 bankruptcy.

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Schlueter Ecklund & Davitt
4023 Charles Street
Rockford, IL 61108

Toll Free: 800-207-5133
Phone: 815-516-8264
Fax: 815-229-0733
Rockford Office Location