There’s a knock on your door, and the stranger standing there seems to know your name. When you confirm who you are, they hand you a packet of paperwork. They just served you with legal notice of a pending lawsuit.
Even if you avoid answering your door when strangers knock, they may actually send the notice via certified mail or post it to your front door. Simply put, you cannot avoid a creditor lawsuit while your accounts are not in good standing. Eventually, the companies to which you owe money will take aggressive action to collect on those debts.
Creditor lawsuits will make the situation worse
Once you go to court, there will likely be a significant paper trail affirming how you have failed to fulfill your obligation of timely repayment. Although you may have a valid reason for falling behind, the courts won’t really care about the reason why.
They will only care about whether you are technically out of compliance. They could place a lien against your biggest assets or even garnish your wages so that your income drops. Filing for personal bankruptcy can be a short-term solution for that lawsuit and a long-term solution for the debt that caused it.
The bankruptcy will stop the lawsuit
Provided that you file before you have to go to court, your bankruptcy case should temporarily prevent a creditor from taking you to court. The court will dismiss the scheduled hearing because of your automatic stay.
Your automatic stay will help you avoid the immediate risks of the lawsuit, while the discharge secured in a successful bankruptcy will prevent future collection activity for certain debts. Bankruptcy can be a powerful tool for those in a difficult position.
A lien on your property or a wage garnishment can mean even worse financial hardship. If you have already found yourself struggling with meeting monthly financial obligations, losing assets or income could make your situation even worse.
Bankruptcy ends abusive collection behavior and gives you an opportunity to rework your budget. Once you discharge some of your debts or renegotiate certain accounts, you may have an easier time paying your other bills, like your mortgage and utilities. Learning more about how personal bankruptcy works can give you confidence about filing when you face aggressive collection tactics, like a debt lawsuit by a creditor.