What is contempt in bankruptcy?
Contempt is being disobedient to or disrespectful of a court of law.
When you file a bankruptcy, you receive an immediate order called an automatic stay. This is the ‘order of relief’ that prevents others from collecting against you. The order is generated automatically, and in each case, there is essentially a (very) brief buffer period to allow the creditor enough time to cease collections, but after a short time, all collections against you should halt based on the strength of the court’s order.
Disobeying court order is an offense that is punishable by contempt by the court for ignoring its lawful order.
In bankruptcy, if the court orders a creditor to do something, the creditor must comply. Failure to comply results in contempt toward the court. If a creditor ignored a court order to cease and desist collections against a debtor who filed bankruptcy, that debtor, typically through their attorney, may bring a motion for contempt against the offending creditor to bring the creditor back into compliance, and to compensate the debtor for the post-bankruptcy harassment and increased expenses the creditor may have imposed on the debtor.
My office regularly files contempt motions and adversary complaints against creditors who ignore the rules.