Can Bankruptcy Stop a Lawsuit?

Believe it or not, research reveals that 1 in 20 people in debt face lawsuits from creditors. Discovering that you’ve become part of this statistic can feel utterly overwhelming. What options do you have when you’re already struggling to make ends meet?

This is where bankruptcy might be the solution you didn’t know you needed. Through legal protections like the automatic stay, bankruptcy could be your shield against lawsuits while providing a path toward regaining financial freedom.

At Whitten & Whitten, we’ve spent years helping people like you stop lawsuits and rebuild their financial lives through bankruptcy. Here’s everything you need to know about how bankruptcy can protect you from lawsuits.

The Automatic Stay: A Shield Against Lawsuits

The moment you file for bankruptcy, an automatic stay takes effect. The automatic stay is a powerful legal shield that immediately halts most collection activities, including lawsuits against you.

Here’s what the automatic stay can prevent creditors from doing the second your bankruptcy is filed:

• Filing new lawsuits against you for unpaid debts.
• Continuing with ongoing lawsuits to collect payment.
• Taking any further action, such as garnishing wages or repossessing property.

This legal protection gives you the breathing room you need while your bankruptcy case is processed, helping you regain control of your financial situation.

Types of Lawsuits Bankruptcy Can Halt

While bankruptcy won’t stop everything, it can pause or eliminate many common lawsuits and debt-related issues. These include:

• Home Foreclosure – Bankruptcy can temporarily stop foreclosure proceedings, giving you time to catch up on missed payments or explore Chapter 13 to save your home.
• Breach of Contract Debts – If you’ve been sued for failing to meet contract obligations, bankruptcy can halt legal proceedings.
• Credit Card Debt Lawsuits – Bankruptcy can stop lawsuits related to unpaid credit card debts.
• Debt Collection Agency Accounts – Prevent aggressive lawsuits and harassing actions by collection agencies.
• Evictions – Bankruptcy may stop an eviction if a judgment hasn’t already been issued.
• Medical Debts – Lawsuits filed over unpaid hospital bills or treatment costs are often stopped by bankruptcy.
• Personal Loan Debts – Bankruptcy can halt lawsuits over personal loans, like those from friends, family, or payday lenders.
• Utility Debt – Bankruptcy might address unpaid utility bills and avoid service shutoffs in some cases.

These protections show just how wide the automatic stay’s reach can be. However, it’s important to understand the limits, too.

When Bankruptcy Won’t Stop a Lawsuit

Unfortunately, bankruptcy isn’t a solution for every type of legal issue. Some lawsuits and debts are unaffected by the automatic stay, including:

• Child Custody Cases – Legal matters regarding custody rights continue as normal.
• Criminal Cases – You cannot use bankruptcy to avoid criminal charges or penalties.
• Divorce and Alimony Cases – Bankruptcy won’t stop divorce proceedings or your obligation to pay alimony.
• Evictions with Court Orders – A landlord can continue the eviction if a court has already issued a possession order.

Understanding these limitations is critical to determining whether bankruptcy is the right solution for your situation. A bankruptcy attorney can help you sort through these nuances.

What Happens If a Creditor Wants to Continue the Lawsuit After Bankruptcy?

Creditors can ask the bankruptcy court to lift the automatic stay if they believe continuing their lawsuit is justified. However, this isn’t an easy process, and creditors must present a compelling reason to the judge to approve their request.

For example, a creditor might argue that their financial interest would suffer significant harm if they cannot continue collecting on a debt promptly. Even in these cases, the court’s approval isn’t guaranteed, especially if the debt is eligible for discharge under bankruptcy laws.

Why You Need a Bankruptcy Attorney

Facing a lawsuit and considering bankruptcy can feel overwhelming, but you don’t have to go through it alone. Working with an experienced bankruptcy attorney provides several critical benefits:

• Legal Guidance – They’ll analyze your financial situation and determine whether bankruptcy is the best option for stopping lawsuits.
• Defense Against Creditors – Your attorney will protect you from creditors attempting to bypass the automatic stay.
• Maximize Benefits – Whether you’re filing Chapter 7 or Chapter 13, they’ll ensure you receive the maximum legal protections and relief.

Take Control of Your Financial Future

Dealing with lawsuits over unpaid debts doesn’t have to spell the end of your peace of mind. Bankruptcy provides powerful tools to protect you from aggressive creditor actions, giving you the space and time to regain financial stability.

If you’re ready to explore how bankruptcy can stop creditors and prevent lawsuits, work with Northern Indiana’s trusted bankruptcy attorneys at Whitten & Whitten. With decades of experience, we’re not afraid to take on creditors and will fight tirelessly on your behalf. Contact us today – your fight for financial freedom starts now.