When you aren't up to date with your credit card debts or other debts, your creditors can file a lawsuit against you. While you can stop your creditor's lawsuit by filing for bankruptcy, there are certain lawsuits that bankruptcy can't stop. Here are answers to common questions on using bankruptcy to discharge lawsuits.
How Does Bankruptcy Stop a Civil Lawsuit?
Filing for bankruptcy can stop civil lawsuits through a legal concept known as an automatic stay. With this injunction, creditors are barred from collecting from you. An automatic stay is effective from the time you file for bankruptcy.
An automatic stay permits the court to evaluate your assets and make sure they're sufficiently divided among your creditors. This ensures no creditor gets a disproportionate share. Your bankruptcy attorney will advise you on how to enforce an automatic stay to protect you from creditors who are harassing you after filing for bankruptcy.
What Types of Lawsuits Does a Bankruptcy Stop?
When you file for bankruptcy, the court takes over any case involving money you owe to others. The court handles the debt, and the lawsuit is dismissed.
Some lawsuits a bankruptcy can stop are home foreclosures, unpaid credit card balances, financial disputes involving business partners, breach of contract cases, and damages for personal injury cases.
Filing for bankruptcy also stops repossession-related collection actions and deceptive trade practices. To be on the safe side, make sure you inquire from your bankruptcy attorney whether filing for bankruptcy will help stop the lawsuits against you.
What Types of Lawsuits Can't Be Stopped by Filing for Bankruptcy?
The court can rule in favor of your creditors for non-dischargeable obligations. In such cases, filing for bankruptcy will not do you any good.
The most common non-dischargeable judgments include cases arising out of student loans, criminal fines and penalties, domestic support obligations like alimony and child support, and debts acquired because of false pretenses, misrepresentation, and fraud.
Bankruptcy also doesn't discharge cases involving malicious injury caused by a debtor or injury caused by drunk driving. Also, bankruptcy doesn't remove liens placed on your property. Your bankruptcy attorney will file a motion with the court to remove a lien placed on your property.
When you get a bankruptcy discharge, it means you're no longer obligated to pay the discharged debts. However, if a creditor gets a lawsuit judgment against you, they can enforce it by placing liens against your house, levying your bank accounts, and garnishing your wages. It's essential to differentiate between the lawsuits that bankruptcy can discharge and those it can't before proceeding to file for bankruptcy.