Does Filing for Bankruptcy Protect You from Lawsuits?

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The idea of filing for bankruptcy is not often welcomed by many people. However, when debts are too big, and creditors are on your neck, filing for bankruptcy might be the only option you have to somehow reduce the problem. There are instances where creditors want to use a wage garnishment plan to recover their money. Hiring a wage garnishment attorney in Salt Lake City is imperative when it comes to legal matters like this. Once you file for bankruptcy, all debt collection efforts come to a halt.

But what happens next, especially when the creditors had sued you already?

Automatic Stay

The first step in stopping the debt collection efforts is to work with a lawyer who handles bankruptcy lawyer. The lawyer will seek to understand your circumstances; the amount of debt you owe, current income, and financial needs. The lawyer will then help you choose the right type of bankruptcy to file for. You can either file for Chapter 7 or 13, depending on your current circumstances.

The court will then assess your case, and once your case is accepted, the court goes ahead to issue an automatic stay. The court takes about a week to send official communication to stop any debt collection methods.

Once the creditor comes to claim their money, give them the details of the bankruptcy case, and their efforts will come to a stop. This is because the automatic stay protects you from any efforts to recover the debt from creditors. As a result, any lawsuit against you regarding debt is null at this point. Creditors can try to challenge the automatic stay decision by the court. However, experienced bankruptcy lawyers understand what it takes to ensure the validity of an automatic stay.

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A bankruptcy case closes through a process known as the discharge. Once you file for bankruptcy, the effects continue even after the discharge. But the debt implication depends on the type of bankruptcy you filed for.

Chapter 7 vs. Chapter 13 Discharge

For Chapter 7 bankruptcy, one receives a discharge of almost all debts with exceptions of school loans and taxes. That means that all other lawsuits are invalid as you do not owe any debt. On the other hand, after filing for Chapter 13 bankruptcy, you should repay the debts in small amounts over a spread amount of time. That means that you will pay off the debt eventually. In this case, as well, you will not receive any pressure from creditors as there is a solid plan to repay the debt.

Once in debt and your creditors are demanding the payments, there is a possibility that the creditors will sue you. The court will then give the creditors permission to garnish your wages. Wage garnishment attorneys will advise you to file for bankruptcy in Salt Lake City and guide you through the process.  Filing for Chapter 7 bankruptcy will help you eliminate the debts by liquidating your assets. On the other hand, filing for Chapter 13 bankruptcy will help you pay off the debt by reducing the payable amount over time. That way, you can focus on paying the debt without the pressure from debt collectors.

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