Yes. When you file for bankruptcy in New York, a federal court order called the automatic stay takes effect immediately and stops most creditor lawsuits in their tracks, along with wage garnishments, frozen bank accounts, and collection calls. A creditor cannot keep pursuing a lawsuit or enforce a judgment against you while the stay is in place without bankruptcy court approval. That protection is one of the most powerful reasons people turn to bankruptcy when the pressure becomes too much. At Robert H. Solomon, PC, our Long Island bankruptcy lawyer helps families in Nassau and Suffolk counties and beyond understand what filing can and cannot do before they decide.
How a Creditor Lawsuit Unfolds in New York
Being sued starts with a summons and complaint, which is the official notice that a creditor has taken you to court. You have only a short window to respond, and missing it can be a very costly mistake. If you do not answer in time, the creditor can ask the court for a default judgment, a decision in its favor entered simply because you did not respond.
Once a creditor holds a judgment against you, New York law opens several collection tools:
- Wage garnishment, in which a portion of your paycheck is taken through an income execution before it reaches you.
- A frozen or restrained bank account, which can lock up the money you need for rent and groceries.
- Property liens and levies, which attach the judgment to what you own.
As the New York court system’s guidance for people served with a debt summons explains, a default judgment can appear on your credit report for years and gives the creditor the right to reach your bank account and your salary. Understanding this timeline matters, because bankruptcy can interrupt it at almost any point before the money is actually taken.
The Automatic Stay Stops the Lawsuit the Moment You File
The instant your bankruptcy petition is filed, federal law imposes the automatic stay. It applies to all entities and halts the commencement or continuation of a lawsuit against you, the enforcement of a judgment already obtained, and any act to collect a debt that arose before you filed. In plain terms, the creditor suing you has to stop.
The stay reaches far beyond the courtroom. It pauses wage garnishments, lifts freezes on bank accounts going forward, and puts an end to collection letters and phone calls. It can also halt a foreclosure sale and buy time to explore alternatives. The federal courts describe this protection in their plain-language overview of bankruptcy terms, and it is the reason many people file the moment a lawsuit or garnishment appears. A creditor who knowingly violates the stay can be ordered to pay the damages it causes, which gives the protection real teeth.
What the Automatic Stay Does Not Stop
The automatic stay is powerful, but it is not unlimited, and an honest picture helps you plan. Federal law carves out several matters that a bankruptcy filing does not pause.
The stay generally does not stop the following:
- Criminal proceedings, which continue regardless of a bankruptcy filing.
- Child support and spousal support, including establishing or collecting those obligations from income or property that is not part of the bankruptcy estate.
- Repeat filings, where someone who had a prior case dismissed within the past year may receive only a limited stay unless the court extends it.
A creditor can also ask the bankruptcy court for permission, called relief from the stay, to resume a specific action, most often to move forward on collateral like a house or a car. For most people facing an ordinary credit card or medical debt lawsuit, though, the stay holds and the lawsuit freezes. Knowing these limits up front lets you focus your energy where bankruptcy actually helps.
Chapter 7 or Chapter 13: Which Fits a Creditor Lawsuit?
Bankruptcy is not one-size-fits-all, and the right chapter depends on your income, your assets, and your goals. Both chapters trigger the same automatic stay, so both stop a lawsuit, but they resolve the underlying debt differently.
Here is how the two most common consumer options compare:
Chapter 7 Bankruptcy
A Chapter 7 bankruptcy can wipe out qualifying unsecured debts such as credit cards, medical bills, and personal loans, often in a matter of months. Filers must meet income requirements, known as the means test, to qualify for a bankruptcy discharge under Chapter 7.
Chapter 13 Bankruptcy
A Chapter 13 bankruptcy reorganizes what you owe into a manageable three-to-five-year repayment plan, which can be a strong fit if you want to catch up on a mortgage and keep your home. A Chapter 13 plan can also help debtors who owe taxes, domestic support obligations, and other debts that are not dischargeable in a Chapter 7 case.
Choosing between Chapter 7 and Chapter 13 is a decision best made with guidance, because the wrong chapter can leave protection on the table. Our firm walks through your full financial picture before recommending a path.
From Lawsuit to Fresh Start: What Discharge Means
The automatic stay is temporary protection. The lasting relief comes at the end of a successful case, when the court grants a discharge. A discharge voids a judgment as to your personal liability for a discharged debt and acts as a permanent injunction barring the creditor from ever trying to collect it again. The lawsuit that once loomed over you simply ends.
Still, a discharge does not erase everything, and it is important to know what typically survives:
- Recent income taxes owed for the periods the law protects.
- Domestic support such as child support and spousal maintenance.
- Most student loans, unless you prove that repayment would be an undue hardship.
- Debts obtained through fraud or false financial statements.
Because the line between dischargeable and non-dischargeable debt can be technical, it is worth reviewing your specific debts with an attorney before you file. That review is exactly the kind of clarity our office provides in a free consultation.
Talk With a Long Island Bankruptcy Attorney Before the Judgment Lands
If a creditor has sued you or already won a judgment, the sooner you act, the more options you have. Robert H. Solomon, PC has spent decades helping Long Island individuals and families stop lawsuits, protect their paychecks, and rebuild their financial footing. We offer free consultations, and we can meet in person, by Zoom, or by phone, with Spanish-language service available. Contact our office today to talk through your situation and take the first step toward a fresh start.