Can You Use Personal Bankruptcy to Get Out of Legal Problems?

Dealing with legal problems and bankruptcy or other financial troubles at the same time can feel overwhelming. You might wonder if filing can help you escape some of your legal issues.

As a personal bankruptcy lawyer, I want to help you understand what bankruptcy can and can’t do for your legal problems. Knowing the facts can help you make the best decision for your situation.

What Bankruptcy Can Do

Bankruptcy offers the opportunity for a fresh start and can help with a variety of legal problems, including:

1. Discharge Certain Debts

When you file for personal bankruptcy, you can discharge, or wipe out, many types of debts. These include credit card debts, medical bills, personal loans, and some utility bills. If your legal problems are connected to these types of debts, bankruptcy can significantly reduce your burden.

2. Stop Wage Garnishments

If a court has ordered wage garnishment due to unpaid debts, filing for bankruptcy will put an immediate stop to it. This can give you some breathing room and help you regain control of your finances.

3. Halt Collection Actions

Once you file for bankruptcy, an automatic stay goes into effect. This means creditors have to stop all collection actions against you. Depending on your situation, this might include lawsuits, foreclosures, and repossessions.

Because bankruptcy has the power of the legal system behind it, with an automatic stay in place, creditors can’t fight you any further on these issues.

What Bankruptcy Can’t Do

Bankruptcy does have certain limitations, and it isn’t a cure-all in the case of major legal problems. Here are some things to keep in mind – problems bankruptcy might not solve.

1. Eliminate Certain Fines and Penalties

Bankruptcy generally doesn’t discharge fines or penalties owed to government agencies. This includes things like traffic tickets, criminal fines, and court-ordered restitution. If your legal problems involve these types of debts, bankruptcy won’t make them go away.

2. Discharge Child Support and Alimony

If your legal issues involve unpaid child support or alimony, bankruptcy won’t necessarily cover it. These obligations are considered priority debts and must be paid in full, even if you file for bankruptcy.

However, bankruptcy can relieve so many other debts that it helps you pay back these priority debts as well, because it frees up funds you otherwise wouldn’t have.

3. Resolve All Lawsuits

Bankruptcy can stop collection lawsuits, but it doesn’t magically stop all lawsuits. For example, if you are being sued for personal injury or property damage that you caused, bankruptcy might not protect you from these legal actions.

Keep in mind that even with all of these exceptions, bankruptcy still might help you depending on your exact situation and goals. An experienced bankruptcy attorney can discuss your options with you and give you an idea of the best way to proceed.