Can Bankruptcy Stop a Lawsuit?

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The recent news of the Catholic Archdiocese of San Francisco’s bankruptcy filing has exposed a lot of anger and other strong emotions. This bankruptcy filing might halt more than 500 civil suits. But coupled with Johnson & Johnson’s attempts to create a spin-off company, assign the debt to the new company, and file for bankruptcy as the new company, it’s important to understand how bankruptcy can stop a lawsuit and protect debtors from litigation.

Most of our clients are consumers or small to medium size businesses. When our clients are sued, it is usually by companies such as hospitals, credit card issuers, and other lenders. A bankruptcy filing will stop a lawsuit when a lender files a complaint against one of our clients. Not only will the bankruptcy filing stop a lawsuit but also it can stop wage garnishments, and creditor’s harassment.

When a bankruptcy is filed, a legal tool called the Automatic Stay, takes effect and gives the debtor temporary relief from creditors. The Automatic Stay will stop most of collection actions, including lawsuits, wage garnishment and harassment from creditors, bank levies, and liens on property. However, the extent of the relief varies on the type of bankruptcy and the type of Lawsuit. For example, punitive damages awards, child support, alimony are not protected. This is why it is so important to speak to an experienced bankruptcy attorney about your situation and course of action.

Lawsuits are expensive. Sometimes for the regular person, farmer, or small business, it is simply easier and smarter in the long term to file for bankruptcy, stop or end the lawsuit, and move on. At WM Law, we’ve helped thousands through the bankruptcy process and into a future with no lawsuits. If you’d like more information, visit us at or call for a free consultation with one of our experienced bankruptcy attorneys. At W M LAW, we are, “Here to Help”.

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Jeffrey L. Wagoner


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