If creditors are threatening to take your property or money for a debt, you may want to ask a lawyer how you can stop lawsuits, garnishments, repossessions, foreclosures or other collection efforts.
One of the only ways to stop all collection efforts immediately is to file a bankruptcy case. When you file a bankruptcy petition, the automatic stay immediately prohibits creditors from taking any further legal action to collect a debt.
How Does an Automatic Stay Work?
We have many people call hoping to ask a lawyer how they can stop lawsuits and other collection efforts. In many cases, bankruptcy is the answer.
Under the Bankruptcy Code, when a debtor files a bankruptcy case, the automatic stay goes into effect and remains in effect during the bankruptcy or until modified by the court. The automatic stay prohibits creditors from continuing collection efforts including but not limited to:
- Lawsuits
- Garnishments
- Foreclosures
- Repossessions
- Telephone calls, letters and other attempts to collect a debt
When you file for bankruptcy, the court sends a notice to all creditors listed on your bankruptcy forms. The notice informs your creditors that you have filed a petition for bankruptcy, and if they continue collection efforts without court approval they will be violating the terms of the automatic stay and may be subject to court sanctions.
Lawsuits
If you have been served with a lawsuit, you are probably battling emotions such as fear, anxiety and uncertainty. Instead of continued worrying, contact a bankruptcy attorney immediately. By filing a bankruptcy case, we can more than likely stop the lawsuit from proceeding. The automatic stay prevents the creditor from continuing with the lawsuit. In most cases, the debt will be dischargeable in your bankruptcy case, so in addition to avoiding a lawsuit, you will no longer be responsible for that debt.
Under 11 USC 362(b), there are a few exceptions, including but not limited to:
- Criminal proceedings
- Paternity actions
- Domestic support obligation cases
- Child custody or visitation cases
- Cases involving domestic violence
- Divorce – except to the extent that the parties are dividing property
- Suspension or restriction of a driver’s license
Garnishments
If you have received notice that your income will be garnished due to a court order, you can stop the garnishment before it even begins by filing a bankruptcy. Also, a bankruptcy filing can also stop a garnishment that has already begun and, in some cases, your garnished wages will be returned to you, but you must act quickly.
The automatic stay does not apply to a garnishment for child support or alimony.
Foreclosures and Repossessions
Once you file for bankruptcy, the automatic stay prohibits a creditor from seizing or repossessing your property without court approval. If you file a Chapter 13 bankruptcy, you may be able to pay for the vehicle through your repayment plan at a lower interest rate and lower monthly payment.
Trying to get a vehicle back after it has been repossessed, on the other hand, is very difficult, time-sensitive and costly. We cannot guarantee that you will be able to have the vehicle returned if you wait to file a bankruptcy case until after the vehicle has been repossessed. For this reason, it is important to discuss your situation with a bankruptcy attorney before your creditors begin collection attempts.
Filing a bankruptcy can also stop a foreclosure immediately. An automatic stay prohibits the mortgage company from filing a foreclosure action, continuing a foreclosure action or selling a property at foreclosure sale once your bankruptcy case is filed. With a Chapter 13 bankruptcy case, you can pay the past due mortgage payments through your bankruptcy plan to keep your home.
Please note, once your home is sold at a foreclosure sale, filing a bankruptcy case will not void the sale. In order to save your home, you must file a bankruptcy case prior to the foreclosure sale.
If you believe you are in a position for creditors to begin collection attempts on your property or wages, it may be time to ask a lawyer if bankruptcy is right for you. Sign up for a free bankruptcy consultation to see how we can help you not only prevent creditors from taking your income or possessions, but get back on the right financial track.
