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Served with a Lawsuit? Find out if bankruptcy can help you.

May 5, 2020
Bankruptcy

We often receive call from individuals living in Los Angeles who were recently served with a lawsuit. One of the questions often asked is whether a bankruptcy will stop this lawsuit and how a bankruptcy will one deal with a lawsuit in Los Angeles.  As more fully explained below, a bankruptcy (no matter what chapter) will stop a lawsuit, at least temporarily. Additionally, bankruptcy may also get rid of the debt underlying the lawsuit, which would effectively render the lawsuit “moot” and unenforceable against the bankrupt debtor.

A Bankruptcy in Los Angeles Could Stop a Lawsuit Through the “Automatic Stay”

The “automatic stay” is a protection afforded by the bankruptcy Code to all individuals who file a bankruptcy. The effect of the automatic stay is that all collection actions against the bankrupt Debtor will cease and the underlying debt will often be wiped out. Although creditors can seek termination of the automatic stay by filing a Motion with the Court, said process takes at least a few weeks. Generally, however, the Bankruptcy Court will not terminate the automatic stay unless there is good reason to do so. Generally, a credit card company will not file such Motion, and even if they did, said Motion would probably not be granted.

An additional benefit of the automatic stay is that creditors are prevented from filing a lawsuit against the Debtor while the automatic stay is in effect. Even if a lawsuit was filed before the bankruptcy, the filing of the bankruptcy puts a stop to any lawsuit. Attempts by the creditor to resume the lawsuit in the fact of the automatic stay could result in sanctions imposed against the creditor for violation of the automatic stay.

It is important to notify the individual who filed the lawsuit (or his/her attorney) of the bankruptcy, once it is filed. Such notice should be given in writing, with proof that the notice was timely given.

Should Los Angeles Residents Always File a Bankruptcy When Served With a Lawsuit?

The short answer is “no.” Bankruptcy is not always needed, and individuals who are not drowning in debt, or have debt that they can afford to repay should not file a bankruptcy (they may also not be eligible to file a bankruptcy in Los Angeles. Additionally, some debts resulting in lawsuits may not be “dischargeable” (or wiped out) so it is important to know what each lawsuit is for.  If the reason for the bankruptcy is the lawsuit, and the debt happens to be non-dischargeable, then there would not be much of a benefit to file a bankruptcy to fend of the lawsuit. It is best to discuss your situation with a qualified Los Angeles bankruptcy attorney who will asses your financial situation and determine if bankruptcy is right for you.

Find Out if Your Should File a Bankruptcy – Consult With a Los Angeles Bankruptcy Attorney Now!

If you or your loved one is considering bankruptcy, give us a call now. We would be happy to talk to you and provide a free confidential consultation.

Call us now at (310) 444-9444 for a FREE CONSULTATION!

 

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Testimonials

Katz Law is unlike any of these attorneys you see on billboards. You are not just another number. They kept me updated about my case from beginning to end, and I was able to a settlement much higher than what I hoped for. I loved the fact that someone was always available to speak to me and I never felt like a stranger. What more can I ask for in an attorney?

Jennifer P. , Personal Injury Client, Email

I have worked with Lior Katz and Katz Law for several years now and have nothing but good things to say. Katz Law has treated me like family from day one. When I have a complicated matter, I know who to go to.

Esther S. , Bankruptcy Client, Email

I had an amazing experience with Lior Katz representing me. A true professional. Strong work ethic's. Returned my emails within 10 minutes. Perfectionist, professional, Truly cares about his clients. I am 100% satisfied. He's been a strong blessing in my life.

David R. , Bankruptcy Client, Yelp.com

I hired Katz Law to represent me after I was rear ended in a small accident. They have been very responsive and able to answer all my questions. They set me up with a doctor and did not charge me anything to start the process. Glad I finally found such a nice attorney and I feel like I am in great hands. Also a beautiful and clean office building... it's nice when someone else takes care of all the headache involved with a case, and this firm did just that. I would definitely recommend this firm

Johnatan P. , Personal Injury Client, Yelp.com

This office represented me after I was involved in a car accident. I didn't know what to do and decided to give them a call after reading their reviews on Yelp. Thank god I did that. They were very responsive to my emails and got me a settlement that is much higher than what I thought I would get. They also helped me negotiate my medical bills. I am planning to recommend them to all of my friends and family.

Karla L. , Personal Injury Client, Yelp.com
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