When you are served papers telling you that a creditor has filed a lawsuit against you, it can be incredibly overwhelming. However, it’s imperative to understand that you have legal options during these matters. One option you may consider if you’re in a considerable amount of debt is to pursue bankruptcy. The following blog explores what you should know about how lawsuits are handled during bankruptcy and the importance of discussing your legal options with a Montgomery County bankruptcy lawyer.
What Happens When I File for Bankruptcy?
When you file for bankruptcy, you’ll repay as much of your debt as possible before the remaining eligible debts are forgiven. How the debt is paid is based on which chapter you choose to file. Generally, when you file Chapter 7, your non-exempt property will be liquidated by the trustee assigned to your case, and the funds will be used to repay creditors. However, during Chapter 13, you will be placed on a three to five-year repayment plan in which you will make one monthly payment to your trustee. They will then distribute the funds accordingly to each creditor.
At the conclusion of both plans, any remaining debt that is eligible will be discharged. Essentially, this means that you are no longer under any legal obligation to repay the debt in your name.
Will Filing for Bankruptcy Stop Lawsuits?
When you file for bankruptcy, you will also be granted something called an “automatic stay.” Essentially, this means all collection efforts against you must stop. This includes being contacted by creditors, wage garnishment, foreclosures, and, in many instances, lawsuits. This stay lasts from the moment you declare bankruptcy to when your case is officially closed by the court.
It’s imperative to understand that filing for bankruptcy won’t stop certain types of lawsuits from proceeding. Generally, any ongoing legal action, like a criminal case, child support dispute, or evictions after the landlord has been granted the right to evict you, will not be stopped. Additionally, you’ll find that divorce cases may be stopped due to the impact bankruptcy can have on property distribution.
However, you’ll find that any lawsuit that impacts your debts or assets, including personal injury cases, will be halted during the bankruptcy process.
In some instances, a creditor can petition the court for petition to continue a lawsuit. However, there are only specific circumstances under which the court would lift an automatic stay. This includes when the outcome of the case won’t impact the bankruptcy filing or if the outcome of the case will decide a matter that heavily determines how a matter is handled during the case.
As you can see, filing for bankruptcy while facing lawsuits can be incredibly difficult to navigate. That is why it’s in your best interest to connect with an experienced attorney with Mudrick & Zucker, P.C. Our team knows how complicated these matters can be, which is why we are dedicated to helping you through these difficult times to fight for the best possible outcome. Reach out to our team today to learn more.
