If you are facing a collection lawsuit, it can be stressful and overwhelming. Filing a Chapter 7 or Chapter 13 may be a beneficial option to consider. When you file a bankruptcy case, the automatic stay goes into effect and stops all debt collection activity, including lawsuits where a monetary judgment is being sought against you.
The bankruptcy process allows you the ability to comprehensively deal with your debts. A Chapter 7 debtor can typically discharge or cancel the majority of his or her debts. A Chapter 13 is designed to allow you to reorganize your debts and repay creditors through a repayment plan.
What happens to the lawsuit against you? The case is typically put on hold while your bankruptcy is pending. Depending on the type of bankruptcy filed and the type of debt involved in the lawsuit, you may be able to discharge the debt and the lawsuit ends because you are no longer liable to pay the debt.
It is important to understand that some types of court proceedings are allowed to proceed, at least in part, even after the bankruptcy has been filed. For example, litigation regarding custody and current child support is not halted by the bankruptcy case.