Filing bankruptcy often only becomes a consideration after an individual realizes that there is no way to recover from their financial situation without help. For small business owners, this can be true once they notice that they are not yielding a satisfactory return on investment (ROI). Meanwhile, consumers often take action after seeing their credit score take a hit as they continue to receive an influx of debt collection calls. Finding out that a creditor or lender is suing, however, often sends many individuals into a panic, as they look to mediate the situation as soon as possible.
Obtaining a lawyer and filing bankruptcy is one of the most effective ways to put an immediate halt to civil litigation. The way this is accomplished is through an automatic stay. This court order prohibits creditors from pursuing you, stops legal action and any attempts to recover funds. The only way civil litigation may continue is if one of two things happen:
- The creditor convinces the court to lift the automatic stay.
- The creditor files and wins a lawsuit for the same issues in bankruptcy court.
The chances of a creditor pursuing the case are often low because filing for bankruptcy symbolizes a lack of funds. Therefore, the bankruptcy process can be mutually beneficial. In the event the creditor takes the case to bankruptcy court, it’s essential that you have a knowledgeable attorney on your side who can help mitigate the situation.