According to the bankruptcy code, those in California and throughout the country who are injured by the violation of an automatic stay are entitled to compensation. If the violation is willful in nature, a debtor can receive actual and punitive damages in addition to the cost of attorney fees. However, there is some question as to whether actual damages include those for emotional distress.

The 11th Circuit has held that debtors are allowed damages for emotional distress under section 362(k)(1) of the bankruptcy code. Three other circuits have also issued the same ruling, and the general reason for the automatic stay was to provide debtors with relief from potential creditor harassment. Therefore, there is a legitimate chance that individuals who have filed for bankruptcy will be reimbursed for financial and non-financial losses. Of course, not every circuit court has agreed with this interpretation.

The Fifth Circuit and the Seventh Circuit have declared that while the possibility exists of obtaining damages for emotional distress, the stay is meant to be financial in nature. If a debtor is seeking these damages, they must show clear and convincing proof that a creditor caused emotional distress by willfully violating the stay. A willful violation means that the creditor had knowledge of the stay and violated it anyway.

Filing for bankruptcy may make it possible for a person to have some or all debt discharged. It may also allow for a stay from creditor activities such as repossessing a car or calling a debtor. Those who have been contacted by a creditor that knew about the stay may wish to consult with their attorney. A legal professional may be able to take steps to stop the violation from happening again and work to obtain compensation for the debtor as well.