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The Bankruptcy StrategistFeaturesBankruptcyLitigation

DE Bankruptcy Court Decision Provides Reminder of Potential Consequences of Violating the Automatic Stay

By Mark E. Felger and Simon E. Fraser
February 01, 2024

An opinion from the U.S. Bankruptcy Court for the District of Delaware provides a reminder of the potentially severe punishment that a party can suffer as a result of its violation of the automatic stay of Section 362 of the Bankruptcy Code, even if the debtor does not suffer any actual damages as a result of the violation.

In general, the automatic stay forbids creditors from taking offensive actions against a debtor outside of the confines of the debtor's bankruptcy case, including efforts to collect debts or pursue litigation against the debtor, exercise control over the debtor's property, or terminate or interfere with the debtor's property interests. Subsection (k) of Section 362 provides for sanctions in favor of the debtor against creditors who violate the automatic stay.

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