How Chapter 7 Bankruptcy in Montgomery County, TX Helps Stop Lawsuits from Debt Collectors

How Chapter 7 Bankruptcy in Montgomery County, TX Helps Stop Lawsuits from Debt Collectors

April 17, 2019

One of the most common questions we receive from our clients regarding Chapter 7 bankruptcy in Montgomery County, TX is whether filing for bankruptcy will put a stop to lawsuits from creditors seeking payment. The answer is that it really depends on the kind of lawsuit as well as the type of debt that forms the basis for the lawsuit.

Here’s some information you should know about how bankruptcy works and what will likely happen to lawsuits in bankruptcy court.

About automatic stays

One of the benefits of filing for bankruptcy is that it levels the playing field, so to speak. Larger, more powerful creditors do not necessarily have the ability to overpower smaller creditors to get payment in a bankruptcy case. This is because when a debtor files a bankruptcy case, an injunction called an “automatic stay” is automatically enforced, preventing creditors from taking actions that complicate the administration of the bankruptcy case.

This means creditors must stop sending harassing letters and making demanding telephone calls. They are also required to cease any foreclosure and repossession actions. Any creditor that wishes to continue with their collection actions must go through the bankruptcy court to have the automatic stay lifted. This is also true for any creditors that wish to file a lawsuit out of bankruptcy court after the debtor has filed for bankruptcy.

Courts can order the automatic stay to be lifted, but will typically apply very strict regulations, and only after the bankruptcy judge has reviewed the case to determine whether the action serves the debtor or the creditor.

Creditors will still attempt to use any methods available to them to collect the money they’re owed. A creditor who files a lawsuit expects the court to enter a judgment in its favor, which essentially proves your liability and forces you to pay up. This then gives the creditor the ability to garnish your wages or seize your bank accounts. Automatic stays will stop debt collection lawsuits.

Domestic actions

Most lawsuits filed in family court will not have to be stayed during bankruptcy cases, however. Family court judges may put a case on hold until one of the parties receives an order from a bankruptcy court, but the bankruptcy court itself does not have any interest in family law matters and will not interfere in any way with the decisions the family law court makes regarding divorces, child support, parental rights or anything else that may come up in such cases.

However, the imposition of alimony or child support could affect a bankruptcy case in the sense that it will have an effect on the resources available to the debtor.

For more information about how lawsuits might affect your bankruptcy filing, we encourage you to contact the office of James R. Jones, Attorney at Law today to learn more about Chapter 7 bankruptcy in Montgomery County, TX. We will be happy to answer any questions you have and advise you on the best way forward in your particular case.

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