People considering bankruptcy may spend weeks evaluating their options. Others may need to act immediately to protect themselves from looming financial hardship. Individuals who have fallen behind on their credit cards or other financial obligations could face lawsuits brought by their creditors.
Creditor lawsuits can trigger worsening financial circumstances, as they may seek to garnish an individual’s wages or place liens against their property. Filing for bankruptcy can potentially protect those who are at risk of worsening financial challenges due to a pending creditor lawsuit.
Bankruptcy can help prevent litigation
The bankruptcy process can take months to complete in a Chapter 7 scenario. Those pursuing a Chapter 13 bankruptcy may need to make structured payments for three to five years before they are eligible for a discharge.
Thankfully, filers do not have to wait for a discharge to receive relief from their financial obligations. The courts provide an automatic stay that takes effect the same day the filer submits their initial paperwork to the courts.
Creditors cannot continue collection efforts while the automatic stay is in effect. Collection calls and letters typically stop. Creditors also usually need to dismiss pending lawsuits until after the resolution of the bankruptcy case. If the debt is eligible for discharge, the filer may not ever need to worry about continued collection efforts for that particular debt.
The negative impact of a wage garnishment or creditor judgment can make an immediate bankruptcy filing one of the better options for those served with the paperwork for a creditor lawsuit. Reviewing lawsuit documents and other financial records with a bankruptcy attorney can help those dealing with financial challenges better take control of their situation and potentially avoid the worst possible outcomes.