A Compassionate,
 Full Service Law Firm

Why filing bankruptcy is a common response to creditor lawsuits

On Behalf of | Jul 22, 2022 | Bankruptcy And Debt Relief

Once you fall behind on your credit card payments or other financial obligations, you quickly learn to not answer the phone if you don’t recognize the number. Collection calls can come in so often that you feel compelled to completely disable the ringer on your phone. 

If they can’t get an adequate response from you by calling you and sending you letters, then the companies that want money from you may take a more aggressive approach to collections. Specifically, they may file a lawsuit against you. 

While you have learned to be wary of the phone, you may have thought nothing of answering the door, only to have a process server advise you of the upcoming lawsuit. For many people facing a creditor lawsuit, filing for bankruptcy is an appropriate response. 

Bankruptcy halts all collection activity

It will take some time for the courts to review your circumstances and determine if you are eligible for a discharge of your debts or a repayment plan if you file a Chapter 13 bankruptcy. You won’t have to wait until your hearing in court to stop collection activity against you. 

As soon as the courts accept your initial filing paperwork, your automatic stay takes effect. An automatic state will halt all collection activity, including a lawsuit. The courts will dismiss a pending lawsuit related to a dischargeable debt until you resolve your bankruptcy matter. If you discharge the debt in your bankruptcy, you won’t have to worry about repaying it. You may also be able to negotiate a repayment plan or restructure the debt if you file for Chapter 13 bankruptcy. 

Taking the right steps when a creditor tries to sue you, like filing for bankruptcy, can help you bounce back from your financial hardship.