Bankruptcy Can Stop Lawsuits From Debt Collectors
One of the most common reasons people search for debt relief is because of an impending lawsuit. There are very few things as scary and concerning as being served a summons to appear in court. For many people, being sued for a debt is the first experience they've ever had in the courtroom.
The most common lawsuit we see when people file bankruptcy cases are for collection lawsuits. Collection lawsuits start when a creditor (someone you owe) files a petition in court. Typically, these cases are filed in the county where you live. In Missouri, there is a website called CaseNet, where these lawsuits may be viewed by the public.
Once the lawsuit is filed, the court issues a summons. The summons is essentially a copy of the petition that has been filed along with a cover sheet that provides general information to the person being sued, often including the court date.
The summons must then be served to you, either by delivering a copy to you at your home or your place of employment, or by leaving a copy with an adult member of your household. Summons are typically served by sheriff’s deputies or by a process server.
If you do not appear, or have an attorney appear on your behalf, at your court date, the judge will likely issue a “default judgment” against you. A default judgment is an order signed by the judge that gives the creditor an opportunity to collect funds from you by garnishing wages or bank accounts or seizing other assets you have.
The good news is that the filing a Chapter 7 or Chapter 13 bankruptcy can stop collection lawsuits by creditors. This means that you will not have to appear in court in front of a judge or speak with the attorney that filed the lawsuit.
Filing a bankruptcy case can also prevent creditors from collecting on any judgments against you. Whenever you file a bankruptcy case, an automatic stay is put into place, which prohibits creditors from attempting to collect money from you. The automatic stay stops all collection efforts, including the filing or continuation of lawsuits.
Although the vast majority of lawsuits can be completely stopped once a bankruptcy case is filed, there are some limitations to this rule. For example, criminal cases are not typically stayed by the filing of a bankruptcy case. Likewise, claims you may have against someone else, such as Social Security claims or for personal injury, are not stayed by the filing of a bankruptcy case.
If you are being sued, speaking with an experienced bankruptcy attorney will enable you to make an informed decision on how to proceed with your lawsuit and determine if filing bankruptcy is your best option to stop a lawsuit from a debt collector in Springfield Missouri.