Attorney Jon Ginter
How Does Bankruptcy Stop Lawsuits?
Most people don’t want to file bankruptcy and only do so as a last resort. In many cases, what that means in practical terms is that they wait until they get sued or worse, garnished, before they decide to file. Fortunately, bankruptcy stops lawsuits and wage and bank account garnishments in their tracks and if you are being garnished it is sometimes even possible to get a little of your garnished funds back after the bankruptcy is filed. In almost all cases, the lawsuit against you is immediately frozen and in most cases the filing of the bankruptcy will ultimately require the person suing you to give up on their lawsuit and dismiss it.
Bankruptcy stops lawsuits because of what is called the automatic bankruptcy stay, which is outlined in section 362 of the bankruptcy code. That code section, in layman's terms, states the following:
-bankruptcy stops lawsuits immediately
-bankruptcy stops garnishment immediately
-bankruptcy stops foreclosures immediately, even on the eve of your house being auctioned off
-bankruptcy stops creditors from putting a judgment lien on your house or other property
-bankruptcy immediately stops tax proceedings against you
-bankruptcy stops collection calls, threatening letters and other creditor harassment
There are exceptions to these rules, but they generally only apply when you file bankruptcy multiple times and the court has reason to believe you are abusing the bankruptcy process in order to stop lawsuits and other collection activity.
Even though bankruptcy stops lawsuits and other collection activity immediately, there are some points to keep in mind.
First, the lawsuits don’t stop until your bankruptcy case is actually filed. “Actually filed” means just what it sounds like: You have to pay me, provide various documents, and schedule an appointment to come in and sign your bankruptcy paperwork before I can file your bankruptcy papers with the
court and stop the lawsuits. For some reason some people seem to think that when they make a down payment towards
their bankruptcy that that is somehow going to stop the lawsuits against them. That is simply incorrect. The court system does not care that you paid me a down payment because that is a business matter between you and me and has nothing to do with the court system. Besides, people say they are going to file bankruptcy all the time and then never follow through on it. If lawsuits stopped every time someone said they were going to file bankruptcy, the whole system would break down. In conclusion, in order for bankruptcy to stop lawsuits, there has to be an actual bankruptcy filed in the
The other thing to keep in mind is that even though bankruptcy stops lawsuits immediately, there is a communication issue with the person who is suing you and with the court where you are being sued. Specifically, there is a delay between the minute we file your case and the minute when anybody knows about it. The bankruptcy court sends notice of the bankruptcy to all the creditors listed in your bankruptcy petition but that process usually takes about a week. My office acts more quickly to notify the courts where you are being sued and, if your wages are being garnished, you employer. Nevertheless, these processes occur by fax and/or mail and the communication is not instantaneous. Everything will get sorted out in the end and if you get garnished after your bankruptcy is filed you are entitled to get those funds back, but the process is a little bit messy and takes time.
If you are being sued or garnished please call me at 440-544-6423 and I will do whatever is legally possible to stop the lawsuits and garnishments against you.