.2512100029348.jpg)
Facing a civil lawsuit while drowning in debt creates overwhelming stress. You're wondering if there's any way to stop the legal action against you while also addressing your mounting financial obligations. The good news is that bankruptcy may provide the relief you're searching for, offering protection from many types of civil lawsuits and giving you a fresh start.
If you're dealing with a civil lawsuit and struggling with debt, time matters. Contact The Law Offices Of Mayer & Newton today at (865) 328-7993 or through our online contact form to learn how bankruptcy could protect you.
Understanding the Automatic Stay
When you file for bankruptcy, something powerful happens immediately: an automatic stay goes into effect. Think of this as a legal shield that stops most collection activities against you. This protection begins the moment your bankruptcy petition is filed with the court, and it applies to a wide range of civil actions.
The automatic stay prevents creditors from continuing or starting new lawsuits, making collection calls, sending demand letters, or pursuing wage garnishments. For someone being sued, this immediate protection can bring much-needed breathing room. However, it's important to understand that while the stay is broad, it doesn't cover every type of legal action.
Which Civil Lawsuits Stop After Filing Bankruptcy?
Most civil lawsuits related to debt collection will halt once you file for bankruptcy. Understanding which cases stop can help you determine whether bankruptcy is the right solution for your situation.
Lawsuits That Typically Stop:
- Credit card debt collection lawsuits
- Medical debt collection actions
- Personal loan collection cases
- Deficiency judgments from repossessed vehicles
- Breach of contract claims related to unpaid debts
- Landlord suits for unpaid rent (with some exceptions)
After you file for bankruptcy, creditors pursuing these types of claims must stop their legal actions. Any judgments they've already obtained generally cannot be enforced during your bankruptcy case. If a creditor continues collection efforts despite the automatic stay, they may face penalties from the bankruptcy court.
Lawsuits That Continue:
Not all civil lawsuits fall under the automatic stay's protection. Some legal matters will proceed regardless of your bankruptcy filing.
Cases that typically continue include criminal proceedings, child support and alimony enforcement actions, paternity suits, and certain tax proceedings. Additionally, lawsuits seeking to establish liability for personal injury or death caused by drunk driving may continue, though the collection of any judgment would be stayed.
If someone is suing you for fraud, intentional harm, or other willful misconduct, that lawsuit may also proceed. The court needs to determine the nature of the debt, which affects whether it can be discharged in bankruptcy.
How Chapter 7 Bankruptcy Affects Civil Lawsuits
Chapter 7 bankruptcy, often called liquidation bankruptcy, can eliminate many types of debt through discharge. When a debt is discharged, you're no longer legally obligated to pay it, and creditors cannot take collection action.
If a civil lawsuit against you involves dischargeable debt, the case becomes essentially meaningless once you receive your discharge. The creditor can no longer collect on the judgment, even if they won the lawsuit before you filed bankruptcy. This makes Chapter 7 particularly effective for dealing with civil lawsuits based on common consumer debts.
The Chapter 7 process typically takes three to six months from filing to discharge. During this time, the automatic stay protects you from collection activities. Once you receive your discharge, that protection becomes permanent for the eliminated debts.
How Chapter 13 Bankruptcy Affects Civil Lawsuits
Chapter 13 bankruptcy works differently from Chapter 7. Instead of liquidating assets, you enter a three-to-five-year repayment plan. The automatic stay still takes effect when you file, stopping collection lawsuits just as it does in Chapter 7.
Under Chapter 13, debts from civil judgments may be included in your repayment plan. You'll make monthly payments to a bankruptcy trustee, who distributes funds to creditors according to your court-approved plan. At the end of the repayment period, remaining eligible debts are discharged.
This approach can be beneficial if you have assets you want to protect or income that makes Chapter 7 unavailable to you. The automatic stay remains in effect throughout your repayment plan, providing long-term protection from collection actions.
What Happens to Existing Judgments?
If a creditor has already obtained a judgment against you before you file bankruptcy, that judgment doesn't automatically disappear. However, the underlying debt may be dischargeable, which effectively neutralizes the judgment's power.
A judgment represents the court's determination that you owe the debt. When you file bankruptcy, the judgment creditor must stop enforcement actions like wage garnishment or bank account levies. If the debt is ultimately discharged, the creditor cannot revive collection efforts after your bankruptcy concludes.
Some judgment liens on property may survive bankruptcy, particularly if they attach to real estate. Your bankruptcy attorney can help you understand whether these liens can be removed through the bankruptcy process and what options exist to address them.
Timing Considerations: When Should You File?
If you're currently facing a civil lawsuit, timing your bankruptcy filing can be strategic. Filing before a judgment is entered stops the lawsuit and prevents the creditor from obtaining a judgment. This can be particularly important if the creditor might otherwise place liens on your property.
However, rushing into bankruptcy without proper preparation can create problems. You need time to gather required documents, complete mandatory credit counseling, and ensure you're filing under the right chapter. Your attorney can help you balance the urgency of stopping a lawsuit against the need for thorough preparation.
In some situations, waiting might be advantageous. For instance, if you're about to incur significant medical expenses or other debts, including these in your bankruptcy filing could be beneficial. Each situation is unique and requires careful evaluation.
Dealing With Non-Dischargeable Debts
Certain debts cannot be eliminated through bankruptcy, meaning related lawsuits won't provide long-term relief even after filing. These typically include recent tax debts, student loans (in most cases), child support and alimony obligations, and debts incurred through fraud or intentional wrongdoing.
If a lawsuit involves non-dischargeable debt, the automatic stay provides temporary protection, but you'll still be responsible for the debt after bankruptcy. Understanding which of your debts fall into this category is essential for setting realistic expectations about what bankruptcy can accomplish.
For non-dischargeable debts, you may need to negotiate payment arrangements or explore other legal options beyond bankruptcy. An experienced attorney can help you develop a comprehensive strategy that addresses all your financial and legal challenges.
Protecting Your Rights During the Process
Throughout your bankruptcy case, it's important to stay informed about your rights and obligations. Creditors sometimes violate the automatic stay, either unknowingly or deliberately. If this happens, you have legal remedies available.
Keep records of any collection attempts that occur after you file bankruptcy. This includes phone calls, letters, emails, or continued legal proceedings. Violations of the automatic stay can result in penalties against the creditor, including potential damages payable to you.
Your bankruptcy attorney serves as your advocate throughout this process, monitoring for violations and taking action when necessary. Don't hesitate to report any concerning creditor behavior, even if you're unsure whether it violates the stay.
Get Help With Civil Lawsuits and Bankruptcy in East Tennessee
Understanding how bankruptcy affects civil lawsuits is the first step toward resolving your financial difficulties. Whether you're already being sued or worried about potential legal action, bankruptcy may offer the protection and fresh start you need.
At The Law Offices Of Mayer & Newton, we help East Tennessee families navigate complex bankruptcy situations involving civil lawsuits. We'll review your specific circumstances, explain your options clearly, and guide you through the process with the attention and care you deserve.
Contact us today at (865) 328-7993 or through our online contact form to schedule a consultation and learn how we can help you move forward.