Bankruptcy: Protection from Lawsuits?

Bankruptcy is a protection from certain kinds of lawsuits. When people file for bankruptcy they are provide legal protection against creditors. Chapter 7 bankruptcy allows people to eliminate their debts without paying creditors. However, chapter 13 bankruptcy provides people with the opportunity to repay creditors in three to five years while paying current debts like mortgages.

Bankruptcy Provide an Automatic Stay

Both options provide protection against lawsuits because of automatic stays. An automatic stay immediately stops any lawsuits filed against people from creditors, certain government agencies and collection agencies.

Bankruptcy Protect Against Emergences

Bankruptcy 13 protects people against foreclosures. For instance, people that are foreclosed on and have their homes up for sale at sheriff’s sales can file for chapter 13 and have the process immediately halted. Unfortunately, chapter 7 doesn’t afford the same protection. However, chapter 7—and chapter 13—protect people against lawsuits from credit card companies before and after lawsuits.

Automatic Stay Can’t Protect Against Some Lawsuits

People filing bankruptcy to stop some government agencies lawsuits such as the Internal Revenue Services (IRS) won’t receive protection. The IRS can still issue tax liens or seize property or income, according to Nolo. Also, people involved in lawsuits involving child support and criminal proceedings won’t be protected if they file for bankruptcy. Any renters seeking protection from eviction lawsuits may not find it. Landlords may continue with eviction proceedings even though there’s an automatic stay.   

Creditors and Trustees Can Lift Automatic Stay

Unfortunately, creditors trying to eliminate an automatic stay by filing a motion for the bankruptcy court to remove, or lift, the stay. Creditors can claim that an automatic stay serves no purpose if people have no equity in their homes or don’t make enough money to pay the back payments.

Bankruptcy trustees can also lift an automatic stay for a variety of reasons such as not showing up for bankruptcy meetings. For instance, if people try to defraud creditors or the bankruptcy court by hiding assets, property or money the stay will be removed.

Contact an Attorney about Obtaining an Automatic Stay

People interested in filing bankruptcy to protect themselves against lawsuits should contact attorneys. Bankruptcy attorneys advise people on which bankruptcy protection they should seek and what they need to do to file. Also, for people filing chapter 13 attorneys can figure out repayment plans.