No one likes the idea of having to file bankruptcy. But sometimes debts become insurmountable and creditors relentless. The only viable choice may be to seek bankruptcy protection. Not only can you get a financial fresh start, but there can be a positive effect of bankruptcy on lawsuits, including those filed by your creditors or debt collectors.
Depending on your circumstances, bankruptcy can eliminate your debts through liquidation of most assets (Chapter 7) or allow you to pay your creditors a reduced amount over time (Chapter 13) and keep your property. By filing, you can stop harassing debt collection efforts, even if you have already been sued. If you believe you may need to file bankruptcy, the experienced Cleveland bankruptcy lawyers of Luftman, Heck & Associates LLP can help.
The Automatic Stay
Once you meet with our debt relief attorneys, we can review your circumstances and determine which bankruptcy chapter meets your needs (and for which you qualify). Chapter 7 bankruptcy has a means test to determine if your income falls below the median income for you as an individual, or for your family size.
If you don’t qualify for Chapter 7, Chapter 13 will be your option.
Whether Chapter 7 or 13, after we file your bankruptcy, the court will issue what is called an automatic stay. An automatic stay temporarily prevents your creditors, collections agencies, and others from pursuing you for your debts. In other words, the calls and letters must stop.
The stay also affects lawsuits. After you’ve filed, no creditor can start legal action against you on the debt. In addition, no action can be taken on any pending suit or to collect a judgment unless the bankruptcy court gives permission. As your counsel, we will work to prevent the stay from being lifted by creditors so that they are approved to continue debt collection efforts.
The effect of bankruptcy on lawsuits continues after your case is closed through what is called the “discharge.” When your Chapter 7 bankruptcy is finished, you received a “discharge” of nearly all your debts (a few exceptions would be debts owed on taxes or school loans). So any lawsuit pending at the time of filing by your creditors has no reason to proceed because you no longer owe the debts.
For Chapter 13 bankruptcy, the debts aren’t technically discharged because they are being repaid through a three- to five-year court-supervised plan. But the effect is similar. Because the debt has been paid, there is no reason for a lawsuit to go forward.
Don’t Go It Alone
The internet is full of Do-It-Yourself advice, including how to file your own bankruptcy. While it may seem like a good idea given your financial position, it is generally a bad idea.
The forms must be correctly filled out and the right documentation must be submitted or your case could be dismissed. You might even risk being unable to re-file. If that happens, you are back to square one and at the mercy of debt collections and lawsuits.
Our Cleveland bankruptcy lawyers will take on your creditors and fight to make sure you are protected from lawsuits and judgments. We will be there to respond to any complaints filed against you, assert that the automatic stay can’t be violated, and work diligently to resolve your bankruptcy so you can regain your financial health.