The longer you go without paying off a debt or without at least making a monthly payment, the more likely it is that the company involved is going to take more aggressive collection action against you. If you have already been subject to letters and phone calls, it’s possible that the creditor could soon file a civil lawsuit against you in the hopes of recovering some of that debt.
In a collections-related lawsuit, creditors typically ask the courts to give them the authority to garnish your wages. When you already struggle to pay your cost-of-living expenses, a garnishment could be catastrophic. If you have recently gotten served with lawsuit paperwork from a company you owe money to, will filing for personal bankruptcy help you avoid going to court?
The automatic stay will usually help you avoid litigation
Regardless of which form of bankruptcy you file, as soon as you file the petition with the courts, you have the protection of an automatic stay on debt collection activity until the courts resolve the matter.
That means that phone calls, letters and even lawsuits attempting to collect on a debt have to stop until the courts decide whether or not to approve the bankruptcy petition. However, it is possible for companies to keep pushing despite someone seeking bankruptcy protection.
Creditors can ask the courts to lift the stay for them
Once they have received notice that you filed for bankruptcy and received the protection of an automatic stay, creditors could in theory ask the courts to lift the stay and allow them to pursue their lawsuit against you.
Only in very specific circumstances do such requests succeed. However, recognizing that there is the potential there for a creditor to continue pursuing specific debts can help you make more informed decisions about your bankruptcy strategy.
