When you are in debt, it can feel like the weight of the world is on your shoulders. However, that feeling can become even more overwhelming when you receive a notice that you are being served. Facing a lawsuit for debts owed can be incredibly nerve-wracking, so understanding your legal options is critical. One option you may want to consider is filing for bankruptcy. The following blog explores how bankruptcy can help those facing lawsuits and why working with a Newburgh bankruptcy lawyer is in your best interest during these complicated times.
Does Bankruptcy Stop Debt Lawsuits?
If you are served papers for an outstanding debt, understanding how to proceed is critical. The most important thing to keep in mind is that you should not, under any circumstances, ignore the lawsuit. Doing so can result in the creditor receiving a default judgment against you, meaning they will receive everything they’ve asked for since you never responded.
As such, one option many debtors pursue is filing for bankruptcy. This is because declaring grants filers protection under the automatic stay. This is a right granted to those who have filed for bankruptcy that prevents collection efforts from continuing against them. As such, if you have been sued for a debt, you may choose to file for bankruptcy to halt the proceedings.
It should be noted that evictions are also considered a type of lawsuit, and as such, filing for bankruptcy can stop an eviction if you file before the judge issues an eviction judgment against you.
While filing for bankruptcy can halt most civil proceedings, it’s important to note that not all cases will be impacted. For example, if you are in the middle of a child custody battle, divorce, or child support lawsuit, bankruptcy will not stop these actions. Additionally, criminal cases against those who file for bankruptcy will continue.
Is It Possible for the Suit to Continue?
If you file for bankruptcy, it’s important to understand that, in some instances, the creditor can ask the bankruptcy court to lift the automatic stay. Typically, the creditor must prove one of two circumstances for the court to permit them to continue pursuing the lawsuit.
Generally, if the creditor can show that the outcome of the lawsuit will not impact the bankruptcy case and the creditor could experience financial harm if the lawsuit does not proceed. Additionally, they may be able to show that the lawsuit will determine an issue that must be resolved during bankruptcy.
When you’re facing lawsuits for debt, one of the most important things you can do is connect with an experienced bankruptcy attorney to discuss your legal options. At the Law Offices of Michael D. Pinsky, P.C., our firm can help guide you through the bankruptcy process so you can reap the full benefits. Connect with us today to learn how we can assist you in these matters.
