Does Hiring a Bankruptcy Lawyer Stop Collection Actions?

Hiring a bankruptcy lawyer can stop creditor phone calls and some other potentially very important collection actions against you.

What relief can you get when you get a bankruptcy lawyer?

Relief After vs. Before Filing Bankruptcy

The moment you file a bankruptcy case, all or most of your creditors must legally stop collecting their debts. The law that accomplishes this is called the “automatic stay.” This is what prevents a home foreclosure or vehicle repossession from going through. It also stops a lawsuit from turning into a wage garnishment, and ends an ongoing garnishment. See Section 362 of the U.S. Bankruptcy Code.

However, if you are just now looking into bankruptcy as an option you may be several weeks, or more, from actually filing your case. In very urgent situations you may be able to file a bankruptcy case quite quickly. But to be practical, it can take some time for you to understand and choose among your options. You may need some time to gather information or documents. It’s sometimes much better tactically to delay filing for a few days or weeks. In all these situations it can be really helpful if you could get some relief sooner than the bankruptcy filing itself.

The Immediate Benefits of Being Represented by a Lawyer

You can often get some immediate relief right after (or sometimes even during) your first meeting with your lawyer. That’s because the lawyer can stop certain things from happening before you actually file your bankruptcy case.

When you become represented by a lawyer and your creditors are informed of this:

• Creditors and debt collectors can usually no longer call you.
• Their collection letters have to be sent to your lawyer.
• They are not legally prevented from starting a lawsuit against you. But they often don’t do so (for at least a certain amount of time). Why not? Because:
  • When creditors sue, they are hoping to get a “default judgment” against you. That’s a quick judgment that happens when you don’t respond to a lawsuit on time. Creditors know that getting an easy judgment is much less likely if you have a lawyer.
  • When a creditor has good reason to think that you are about to file a bankruptcy case, they will be less willing to pay the court filing fee and other costs of suing you.
• If a creditor has already sued you, your lawyer can likely buy some time before a judgment is entered. That gives you more time to file your bankruptcy case and stop that judgment from being entered.

Why This Kind of Immediate Lawyer Help Can Be Very Important

When we talk about immediate relief, partly we’re talking about emotional relief. In our experience THAT kind of relief almost always happens even at your first meeting with your lawyer. You find out that there ARE practical solutions, that there IS a light at the end of the tunnel.

But we’re also talking about even more tangible relief. Getting a lawyer on your side can make an immediate and huge difference in the outcome. Here’s an example.

Example: Preventing a Judgment Lien from Creating a Non-dischargeable Debt

A creditor’s judgment usually turns into a judgment lien against your home. Sometimes a judgment lien can be “voided”—undone—in your bankruptcy case. But depending on factors such as the value of your home, the amount of debt(s) against it, and the amount of your homestead exemption, that judgment lien may NOT be voidable.  That could turn a debt that would have been able to discharge (legally write off) into one that you would have to pay in full. That could cost you thousands of dollars.

Had you instead met with and retained a lawyer before that judgment was entered, the judgment could likely have been prevented.

Conclusion

See a lawyer as soon as possible. Your situation may or may not be that urgent. But the lawyer will be able to tell you what bad events he or she may be able to stop from happening. From that you can decide whether it’s worthwhile retain the lawyer quickly. If so, then you’ll avoid having bad things happen to you that could have been prevented. 

Related posts:

Crucial Question: Can Bankruptcy Stop My Vehicle from Being Repossessed Even If I Am Surrendering It? Crucial Question: How Quickly Will Bankruptcy Stop a Home Foreclosure? Crucial Question: How Quickly Will the Creditors Stop Calling, Suing, Garnishing? How Quickly Will Bankruptcy Stop My Wage Garnishment? Making Sense of Bankruptcy: How Filing a Chapter 7 or 13 Case Stops Creditors’ Actions against You