When faced with a civil lawsuit, many individuals file for bankruptcy due to its ability to swiftly halt certain types of financial claims. However, when you are served with a lawsuit, it is best to get legal advice from a bankruptcy attorney with years of experience in the field. Depending on your circumstances, they can provide key insights into the most effective course of action and the right timing to avoid the potentially adverse financial repercussions of a civil lawsuit.
The Automatic Stay
Bankruptcy’s ability to halt civil lawsuits is centered on the automatic stay. When an individual files for bankruptcy, an automatic stay goes into effect immediately, halting most forms of collection activity, including civil lawsuits.
This stay prevents creditors from pursuing legal actions, garnishing wages, foreclosing on properties, or repossessing assets without the bankruptcy court’s permission. The automatic stay provides individuals with breathing room to assess their financial situation and work towards a resolution.
Types of Civil Lawsuits Halted by Bankruptcy
In a bankruptcy filing, the automatic stay applies broadly to civil lawsuits, encompassing various legal actions. These may include:
- Debt collection lawsuits
- Personal injury claims
- Contract disputes
- Landlord-tenant disputes
- Financial disputes between business partners
- Home foreclosure
- Evictions (provided the order of possession is not yet issued by the court)
- Deficiency balance collection (balance amount owed after the auction of a property)
Regardless of the nature of the lawsuit, in civil lawsuits bankruptcy, the automatic stay provides temporary relief, giving debtors the opportunity to address their financial obligations through bankruptcy proceedings.
Exceptions to the Automatic Stay
While the automatic stay offers significant protection when you file for bankruptcy, certain types of legal actions are exempt from its reach. For instance, criminal proceedings, divorce and child custody actions, child support and alimony matters, evictions (after the landlord was granted possession by the court) and certain tax disputes are generally unaffected by the automatic stay.
In addition, creditors may seek relief from the bankruptcy judge against the automatic stay under certain circumstances, such as in cases involving willful misconduct, bank account fraud, or lack of adequate protection for secured creditors.
Bankruptcy Chapter Matters Related to Civil Lawsuits
The impact of bankruptcy on civil lawsuits can vary depending on the bankruptcy chapter filed. Chapter 7 bankruptcy typically involves the liquidation of assets to repay creditors, which may affect the outcome of civil lawsuits.
In contrast, Chapter 13 bankruptcy allows individuals to reorganize their debts and develop a repayment plan, potentially influencing the resolution of civil lawsuits. Chapter 11 bankruptcy, commonly used by businesses, offers similar protections and restructuring opportunities for ongoing litigation.
Steps to Take if You are Facing a Civil Lawsuit While Considering Bankruptcy
Facing a civil lawsuit while contemplating bankruptcy can be a daunting experience. Here are the steps to consider if you find yourself in this situation:
Seek Legal Advice
The first step is to consult with a skilled and experienced bankruptcy attorney who can assess your financial situation and advise you on the best course of action. A dedicated bankruptcy lawyer will evaluate the implications of the lawsuit on your bankruptcy case and provide guidance on how to proceed.
Understand the Lawsuit
Gain a clear understanding of the civil lawsuit filed against you. Review the complaint and any accompanying documents to understand the claims made by the plaintiff and the potential consequences of the lawsuit.
Evaluate Bankruptcy Options
Discuss the different types of bankruptcy available with your bankruptcy attorney, such as Chapter 7, Chapter 13, or Chapter 11. Each chapter offers unique benefits and considerations, so it’s essential to understand which option aligns best with your financial goals and circumstances.
Consider the Automatic Stay
Understand that filing for bankruptcy triggers an automatic stay, which temporarily halts most civil lawsuits, including debt collection actions, foreclosure proceedings, and wage garnishments. However, certain types of lawsuits, such as criminal proceedings and certain family law matters, may not be affected by the automatic stay in bankruptcy lawsuits.
Assess Timing
Determine the optimal timing for filing bankruptcy in relation to the civil lawsuit. Filing for bankruptcy before a judgment is entered in the lawsuit may prevent the plaintiff from obtaining a judgment lien against your property. However, filing too early may result in the dismissal of your bankruptcy case or the loss of certain bankruptcy protections.
Prepare Bankruptcy Petition
Work with your bankruptcy attorney to prepare and file the necessary bankruptcy petition and schedules with the bankruptcy court. Provide accurate and complete information about your assets, liabilities, income, and expenses to ensure a smooth bankruptcy process.
Attend Court Hearings
Attend any court hearings related to the civil lawsuit and bankruptcy proceedings as required. Your bankruptcy attorney will represent you in bankruptcy court and advocate for your interests throughout the process.
Cooperate with Trustee
Cooperate fully with the bankruptcy trustee assigned to your case. Provide any requested documentation and attend the meeting of creditors—called a 341 meeting—as scheduled.
Follow Legal Advice
Follow the legal advice provided by your bankruptcy attorney and adhere to any court orders or requirements related to the civil lawsuit and bankruptcy case.
Monitor Progress
Stay informed about the progress of the civil lawsuit and bankruptcy case. Communicate regularly with your bankruptcy attorney and address any concerns or developments as they arise.
Advantages of Hiring Macco & Corey P.C. for Bankruptcy and Civil Lawsuit Matters
Hiring Macco & Corey P.C. for bankruptcy and civil lawsuit matters is the best strategic move you can make to address your financial challenges effectively.
Extensive Experience in Bankruptcy Law
The attorneys at Macco & Corey P.C. collectively possess over 70 years of legal experience, with nearly three decades spent as partners in our Suffolk County-based firm, specializing solely in bankruptcy and insolvency matters. Notably, Mr. Macco holds the distinction of being one of just two Chapter 13 trustees in the Eastern District of New York, offering outstanding expertise in consumer bankruptcy from diverse angles.
With deep involvement in both private practice and trustee service, our partners estimate participation in over 100,000 bankruptcy cases, underscoring our firm’s depth of knowledge and dedication to serving clients effectively.
Strategic Legal Counsel
Whether you are facing overwhelming debt or embroiled in a civil lawsuit, we provide strategic legal counsel to help you navigate complex legal matters. Our attorneys meticulously analyze your case, develop customized strategies, and advocate for your best interests in and out of the courtroom.
Comprehensive Representation
We offer comprehensive representation, encompassing both bankruptcy and civil lawsuit matters. From halting creditor actions through bankruptcy’s automatic stay to defending your rights in civil litigation, our attorneys provide full-spectrum legal support to address all facets of your financial challenges.
Personalized Approach
Recognizing that every client’s situation is unique, we take a personalized approach to legal representation. Our attorneys take the time to understand your financial goals, concerns, and priorities, developing solutions that match your objectives and maximize your chances of success.
Proven Track Record
With a long history of success and a track record of delivering favorable outcomes for clients, we instill confidence and trust. Our reputation for professionalism, integrity, and dedication to client advocacy underscores our commitment to achieving the best possible results for you.
Call our top-rated bankruptcy attorneys at 631-549-7900 for reliable debt relief counsel or contact us online.