Stop Creditor Action: The Critical Step After Filing Bankruptcy with the Automatic Stay

Steps to Take to Stop Creditor Action: How to File the Notice of Bankruptcy or Suggestion of Bankruptcy

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

Because of the importance of filing bankruptcy to stop creditor lawsuits, which is accomplished by the automatic stay, I’ve referenced several times the Suggestion of Bankruptcy, which is the final step that should be taken after the bankruptcy petition has been filed. Between the automatic stay and the Suggestion of Bankruptcy, sometimes referred to as the Notice of Filing, it will stop cases that include:

• Car repossessions
• Foreclosures
• Credit card lawsuits aimed at garnishing wages or freezing accounts

While filing for bankruptcy immediately triggers the Automatic Stay, if the creditor or the civil court isn’t formally notified, those collection actions may continue. To ensure the Automatic Stay is enforced, you should file a Notice of Bankruptcy Filing, also called a “Suggestion of Bankruptcy”.

I put together a quick video to show you exactly how this critical step is done.

Step 1: Proof of the Bankruptcy Filing

First, you need official proof that your bankruptcy case has been filed.

When you file for bankruptcy, the docket, which you can access via PACER.gov, includes links to all the documents filed. There you can find the Suggestion of Bankruptcy. Here is a separate blog post and video detailing how to enroll in PACER.gov.

The Notice of Bankruptcy or Suggestion of Bankruptcy contains all the necessary information:

• The name of the debtor (you).
• The district where the case is pending.
• All pertinent case information.

Step 2: File the Notice with the Civil Court

Having the proof of filing for bankruptcy isn’t enough; you must file it with the court where the civil action is pending, whether it’s a foreclosure, car, repo, or credit card lawsuit.

This step is essential. If the creditor and the presiding judge are not notified, they may continue with the proceeding.

What to Include in Your Filing

The document you file with the state court should be formatted like any other pleading. It is essentially a formal notice suggesting that a bankruptcy has been filed.

The form I typically use (and showed in the video) contains:

1. Creditor Information: The bank, Capital One, or whoever initiated the lawsuit.
2. Your Information: As the defendant in the civil case.
3. Case Pending Information: Details about the active civil lawsuit (case number, court name, etc.).

Professor’s Tip: You must ensure that every party involved in the lawsuit is formally served with this Notice of Bankruptcy Filing, and it must be filed with the Clerk’s office where the lawsuit is pending.

What If a Garnishment Goes Through Anyway?

Sometimes, despite timely filing, the “wheels are already in motion.” This often happens with large company payrolls; wage garnishment paperwork may be submitted a day or two in advance. Even if you file the Notice on a Wednesday and your check comes on Friday, the money might be taken.

It does not matter! It’s just a bump in the road.

You have clear proof that:

1. You filed the bankruptcy.
2. You filed the Suggestion of Bankruptcy with the civil court.

While mix-ups and miscommunication are bound to happen, you should have no issues in getting the garnished funds back from the plaintiff or creditor.

If, for any reason, and I have never seen a creditor outright refuse to return the funds, the answer is straightforward: Go back to the bankruptcy court, seek sanctions, and prove that everything was filed timely. The court will then compel the creditor to return the funds and may impose penalties for violating the Automatic Stay.

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link. You can also listen to my podcast on Spotify.

You can learn more about filing for bankruptcy and the bankruptcy petition via this link. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.

You can find additional categories by clicking below or by using the search feature at the top of this page:

• Bankruptcy
• Insights & Analysis

Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.