Can Bankruptcy Protect Against a Debt Lawsuit?
Many people in South Florida who are struggling with debt want to know: can filing for bankruptcy protect against a debt lawsuit? Or, in other words, can filing for bankruptcy prevent a debtor from being sued by a creditor or debt collector? In short, the answer is usually yes as a result of the “automatic stay.” In addition to preventing a new lawsuit from being filed, the automatic stay also halts any lawsuits that are ongoing in addition to stopping any other attempts at debt collection by a creditor or a debtor. One of the experienced West Palm Beach bankruptcy lawyers at our firm can tell you more about how the automatic stay protects consumers who file for bankruptcy in South Florida.
Automatic Stay Stops New Lawsuits from Being Filed
The automatic stay is an injunction in the US Bankruptcy Code that stops new debt collection lawsuits from being filed against debtors by creditors or debt collectors. According to the Cornell Legal Information Institute, “the ‘automatic’ is in reference to the injunction that would prohibit most creditor collection activities after the debtor has filed for bankruptcy,” and “the ‘stay’ begins the moment the bankruptcy petition is filed.”
To be clear, the automatic stay applies as soon as you file your bankruptcy petition, which means that no new debt lawsuits can be filed after that point. Otherwise, the creditor or debt collector will have violated the automatic stay and can face consequences.
Ongoing Lawsuits Will Be Halted
In addition to new lawsuits, any ongoing debt collection lawsuits will also be halted once you file your bankruptcy petition thanks to the automatic stay.
Other Debt Collection Actions Stopped by the Automatic Stay
The automatic stay also stops other debt collection actions, including wage garnishment and foreclosure proceedings. Accordingly, in a Chapter 13 case (or other reorganization bankruptcy filing), the automatic stay and the bankruptcy repayment plan work together to allow a debtor to stop a foreclosure and to get caught up on mortgage payments in order to remain in their home.
Automatic Stay is Not Specific to One Type of Bankruptcy Filing
Now you might be wondering: do I need to file for a specific type of bankruptcy in order to take advantage of the automatic stay? The automatic stay applies in all bankruptcy cases, which means it does not matter if you file for Chapter 7 bankruptcy, Chapter 13 bankruptcy, or Chapter 11 bankruptcy — the automatic stay will protect you.
Contact Our West Palm Beach Bankruptcy Attorneys Today
The automatic stay is one of the most powerful tools in a bankruptcy case, and it regularly prevents debtors from having to face debt collection lawsuits or to figure out the best path forward in an ongoing debt collection case. As we have discussed, the automatic stay also provides other related benefits that you should discuss with an experienced West Palm Beach bankruptcy lawyer at Kelley, Fulton, Kaplan & Eller. Contact us today to find out more about how bankruptcy might be an option for you and to learn more about how our firm can assist you.
Sources:
law.cornell.edu/uscode/text/11
law.cornell.edu/wex/automatic_stay
