Can Bankruptcy Stop a Lawsuit in Arkansas?
If you are facing a lawsuit over unpaid debts, you may be wondering whether filing for bankruptcy can stop the case. In some situations, filing for bankruptcy can temporarily stop certain lawsuits and other collection actions through An automatic stay.
The automatic stay generally goes into effect when a bankruptcy case is filed. It can prevent creditors from taking certain actions to collect debts while the bankruptcy case is pending.
What Is The Automatic Stay?
The automatic stay is a legal protection that generally takes effect immediately after a bankruptcy petition is filed. It can stop or pause certain actions by creditors, including:
Collection calls and other collection efforts
Wage garnishments
Some lawsuits related to the collection of debts
Foreclosures
Repossessions
Certain efforts to enforce judgments
The automatic stay is intended to give you some time while the bankruptcy process moves forward. In Arkansas, creditors may use garnishment proceedings to collect on a debt or judgment.
Arkansas Code § 16-110-102 allows a creditor in a civil action to seek a writ of garnishment in certain circumstances, including after obtaining a judgment. Arkansas law also provides specific procedures for garnishment proceedings under Arkansas Code §§ 16-110-401 through 16-110-417.
Does Bankruptcy Stop Every Lawsuit?
No. Bankruptcy does not automatically stop every type of lawsuit.
The automatic stay generally applies to lawsuits and collection actions involving debts, but there are exceptions. For example, certain criminal proceedings and some family law matters may continue despite a bankruptcy filing.
The effect of bankruptcy on a particular lawsuit can also depend on what the lawsuit is about and what stage the case has reached.
What If I Have Already Been Sued?
Being sued does not necessarily mean it is too late to consider bankruptcy.
If a creditor has already filed a lawsuit against you, filing for bankruptcy may stop certain further collection activity. However, the timing of the bankruptcy filing can matter, especially if the creditor has already obtained a judgment or taken other steps to collect the debt.
In Arkansas, a creditor with a judgment may be able to pursue garnishment to collect the judgment. Under Arkansas Code § 16-110-415, when wages are garnished, an employer generally must hold nonexempt wages, subject to the court's order, up to the amount due on the judgment and costs.
If you have received a lawsuit, judgment, garnishment notice, or other legal document related to a debt, it is important to understand what options may be available before taking action.
Can Bankruptcy Eliminate the Debt?
Stopping a lawsuit and eliminating the underlying debt are two different things.
Depending on the type of debt and the type of bankruptcy filed, some debts may be discharged at the end of the bankruptcy case. However, certain debts are not dischargeable under bankruptcy law. Whether a particular debt can be discharged depends on the circumstances and the applicable bankruptcy laws.
What If a Lawsuit Is About More Than Money?
Not every lawsuit is simply a collection action. For example, bankruptcy may not stop certain proceedings involving child custody, criminal matters, or other issues that are treated differently under bankruptcy law. This is why it is important to look at the specific lawsuit before assuming that bankruptcy will stop it.
Talk to an Arkansas Bankruptcy Attorney
If you are facing a lawsuit because of unpaid debt, bankruptcy may be an option to consider. The automatic stay can provide protection from certain collection actions, but it does not apply to every situation.
Here at ARlaw Partners, we help Arkansas residents understand their bankruptcy options and guide them through the bankruptcy filing process. If you are facing a lawsuit, wage garnishment, repossession, foreclosure, or other collection action, contact our office to learn more about your options.
