HOW BANKRUPTCY CAN STOP A LAWSUIT

A lawsuit can cause tremendous anxiety.  Thousands of lawsuits are filed every day by creditors seeking to collect on credit card debts, medical bills, and other debts that are owed.  Common sense will tell you that if you owe the money, there are few legitimate defenses that will prevent a judgment. 

When you are served with notice of a lawsuit, you are put into the position of having to either defend the lawsuit or ignore it.  If you fail to respond to the lawsuit, fail to answer discovery requests (interrogatories, requests for admissions, production of documents, etc.), or fail to show up to court, the court may enter a judgment against you.  Even if you are successful in navigating all of these procedural landmines, you may still lose your case. After all...you did owe the money.  Once the plaintiff has a judgment against you it can then seize property or garnish your wages.  A lawsuit will also be recorded on your credit report where it stays for seven years (or longer).  Should you seek the advice of a lawyer if you are sued?  Yes!  Will it make a difference?  Probably not.

If you are facing a lawsuit for a debt, you should consider all of your options, including whether a personal bankruptcy (Chapter 7 or Chapter 13) can help.  Once a bankruptcy petition is filed, you are under the protection of a federal judge's court order directing creditors to stop all collection actions, including any pending or anticipated litigation.  This protection is called the Automatic Stay, because it stops creditors immediately upon filing the bankruptcy case. The Automatic Stay also stops wage garnishments (except for a few narrow exceptions like child support), foreclosure actions, and property seizures.  Once the bankruptcy court discharges a debt or state court judgment, the creditor can no longer enforce the debt against you.

While a single lawsuit may not necessarily be a good enough reason to file a Chapter 7 or Chapter 13 bankruptcy, it is usually a warning sign that you need help.  If you have been sued, contact an experienced bankruptcy attorney and review your legal options.  Bankruptcy can stop a lawsuit and discharge credit card debt, medical bills, personal loans, and many other debts.