Bankruptcy to Stop Creditor Lawsuits

From the moment a person files a bankruptcy petition with the court, the law provides for an "automatic stay."  An automatic stay is a legal mechanism that prohibits creditors from being allowed to begin or continue collection attempts.  They are prevented from calling the debtor, from garnishing his wages or bringing suit against him.

Advantages of Chapter 7

There are several Chapters of bankruptcy that a person might file for.  In the case of someone wishing to have his unsecured debts discharged he should consider Chapter 7.  It eliminates most kinds of unsecured debt, such as credit cards, personal loans, medical bills, deficiencies owed toward repossessed vehicles and judgments owed due to car accidents.

Not only will Chapter 7 discharge most of your debt, simultaneously it allows a person to retain almost all of their property.  If the debtor's mortgage and car payments are current (and they don't have significant equity built up in them) there is a provision which will allow for the debtor to reaffirm their debts on these assets.  Chapter 7 essentially allows a person to retain their car and home as well as personal belonging, while at the same time eliminating their debt.

In addition to getting rid of your debt, Chapter 7 allows you to typically keep all of your property. As long as your car and mortgage payments are current, and there is no significant equity in your property, we should have no problem making the arrangements for you to reaffirm the debt. Keep your home, keep your car, keep your personal belongings, but eliminate your debt; that is our goal with Chapter 7.

Chapter 7 as well as other forms of bankruptcy, due to the "automatic stay," is also the perfect way of stopping a law suit immediately and preventing your creditors from garnishing your wages or putting a lien on your home. 

Informing Creditors

Those who are considering garnishing your wages, or who are currently garnishing your wages, need to be informed that you have filed for bankruptcy.  This can take some time to accomplish.  First you should inform the Human Resource and/or Payroll Department that you are filing bankruptcy.  This can be done by faxing or mailing a copy of the first page of the voluntary petition (what is filed with the court).  This page includes the filing stamp which is proof of your filing.  You may wish to let the creditor's attorney know as well; his name should be available on the Earnings Withholding Order (EWO) paperwork which was filed to being the garnishment of your wages. It would also be helpful to send a copy of your bankruptcy petition to your local law enforcement agents who can also be located on the EWO paperwork.

Bankruptcy Lawsuit

Bankruptcy will stop most lawsuits simply by filing, and in many cases bring them completely to an end.  To begin with, lawsuits are brought to a halt after a person files for a bankruptcy lawsuit because of the automatic stay which prevents creditors from collecting against a debt or continuing their actions, including lawsuits.

Think of the automatic stay as a restraining order that prevents creditors from making attempts at collection. This protection is in place until the debtor receives a discharge of their debts, or until the creditor receives some sort of relief from the stay.  For the lawsuit to be completely dropped depends upon the whether the debt you're being sued for is a dischargeable debt or not, as determined by the bankruptcy case.  If the debt at the heart of the lawsuit is a dischargeable debt and is discharged at the end of your bankruptcy, there is no longer a reason for the lawsuit to continue and will therefore end with your bankruptcy.  Most standard collection lawsuits are terminated at the conclusion of a bankruptcy.

Contact an Attorney

Bankruptcy and its consequences can be complex and confusing.  You should contact an attorney to ensure that your rights are protected and that your best interests are provided for.