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How Bankruptcy Can Stop Creditors from Suing You

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Florida residents who are struggling with debt often find themselves in stressful situations where it seems impossible to get the debt under control. In addition to the anxiety that dealing with seemingly insurmountable debt often brings, many debtors worry that they will face legal action from creditors or debt collectors. If you are in this kind of situation, you may already be receiving frequent calls and texts from creditors and debt collectors, and you might heard learned that a creditor or debt collector might be able to take certain forms of legal action against you — such as wage garnishment or a civil lawsuit — if you are far behind on payments.

What you may not know is that a consumer bankruptcy filing can prevent creditors and debt collectors from taking any such legal action against you, and a personal bankruptcy filing can also halt any existing lawsuits that have been filed against you to collect debt. How does bankruptcy do this? In short, the answer is an injunction called the “automatic stay.” Our West Palm Beach bankruptcy lawyers can explain in more detail.

What the Automatic Stay Is and How It Works to Stop Creditors from Suing You 

The automatic stay is a type of injunction that is special to bankruptcy cases and is governed by the US Bankruptcy Code. It applies as soon as a party files for bankruptcy and provides the debtor with protection against any additional actions from creditors.

How does it stop a creditor or debt collector from suing you? In short, once the automatic stay applies to a bankruptcy case, all creditors are put on notice that they cannot start any new actions against you or your property, and they cannot continue to take any existing or ongoing action against you or your property. What this means is that the automatic stay prevents a creditor from filing a lawsuit against you to collect debt, and it also stops a creditor from moving forward with a lawsuit that it has already filed against you. If you were recently served, learning that you are being sued by a creditor, filing for bankruptcy can halt the lawsuit and the creditor cannot move forward with an action against you.

Does the Automatic Stay Permanently Stop a Lawsuit Against Me? 

You are likely wondering: if I file for bankruptcy and the automatic stay protects me, will it permanently stop a lawsuit against me or is it only temporary? The idea is that the automatic stay will protect you either until your debt can be discharged in a Chapter 7 bankruptcy case, or until you can develop a repayment plan that includes the debt at issue or until that debt is discharged at the end of a Chapter 13 case. In other words, the automatic stay stops legal action against you, and through your bankruptcy case, in theory, you will either have that debt (for which the lawsuit would be or was already filed) discharged or repaid through the terms of your repayment plan. In this way, the automatic stay’s power to prevent the lawsuit is permanent in a way since you will no longer be liable for the debt at the end of the bankruptcy case.

The primary exception to consider is if you are being sued for a type of debt that falls into an “exception to discharge” under the US bankruptcy code.

Contact Our West Palm Beach Bankruptcy Attorneys Today 

Are you currently struggling with debt and concerned about actions that creditors or debt collectors may soon take against you in order to recover the money you owe? It might be a good time for you to consider a consumer bankruptcy filing. An experienced West Palm Beach bankruptcy lawyer at Kelley, Fulton, Kaplan & Eller can discuss your financial circumstances with you today, and we can provide you with detailed information about your eligibility for different types of consumer bankruptcy. Do not hesitate to reach out to us to learn more about how we can assist you.

Source:

law.cornell.edu/uscode/text/11/362

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