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Debt Lawsuits

Filing Bankruptcy May Stop a Creditor Lawsuit

If you've been sued for a debt, including credit card debt, you have legal options. While some individuals may choose to fight the lawsuit, many more turn to bankruptcy to completely halt the process.

Learn about your legal options with help from a local bankruptcy attorney. A bankruptcy lawyer can help you evaluate if you should fight the lawsuit or if you should turn to bankruptcy.

Connect with an attorney near you today. Simply fill out the free bankruptcy review form below or call 877-833-2410 to arrange a free, no-obligation consultation.

Creditors Have the Right to Sue

Some debt lawsuits may come from unknown companies. This is because debt collection companies commonly buy and sell old debts. Even if you are sued by a company you've never heard of, they may have the legal right to do so.

After a credit account has gone into default, credit card companies or banks will attempt to collect the debt themselves—but only for a short period of time. If they are unsuccessful, they will sell the debt—and the right to collect it—to an outside company, often for pennies on the dollar.

And if you continue to ignore the calls and letters from these creditors—and if they think they have a winnable case against you—they may end up filing a lawsuit.

Bankruptcy Halts Lawsuits

Filing personal bankruptcy may be one powerful option when faced with a debt lawsuit. That's because bankruptcy comes with a special protection called the automatic stay.

The automatic stay is a court order that is issued with a successful bankruptcy filing that prohibits most creditors from any contact—including repossession, wage garnishment and lawsuits.

With your debt lawsuit on hold, the automatic stay gives you the freedom to focus on your bankruptcy options. There are two main types of personal bankruptcy, which offer unique solutions: Chapter 7 and Chapter 13.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy, also called "straight bankruptcy", is designed to completely eliminate credit card debt, medical debts, personal loans and other unsecured debts—the kinds that often lead to lawsuits.

In Chapter 7 bankruptcy, the court may be able to take certain assets in order to repay creditors. However, not everything is up for grabs. State laws protect some possessions through exemptions. In fact, many Chapter 7 filers have no non-exempt assets, meaning creditors get nothing.

Filing a Chapter 7 case involves determining your eligibility to file under the means test—a requirement that compares your household income to the median income for your household size in your state.

A bankruptcy attorney can help you determine if you qualify for filing Chapter 7 bankruptcy.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy, also called "wage-earner's bankruptcy", creates a structured, court-approved repayment of debts. Chapter 13 is often used by those who:

  • Have valuable assets not protected by exemptions
  • Do not qualify for Chapter 7 under the means test
  • Wish to repay their debts but need help

Filing Chapter 13 bankruptcy involves creating a workable three-to-five year plan, in which the debtor makes a single monthly payment to the bankruptcy court, which is then distributed to creditors. Secured creditors (such as mortgage lenders) are given priority in the plan, and unsecured debts are often reduced or eliminated.

Creditors Suing? Get Help Today

If you're being sued by creditors, or fear that a debt lawsuit is around the corner, get help today. A bankruptcy attorney can further explain how filing bankruptcy may end creditor harassment and give you breathing room from debts.

Simply fill out our free bankruptcy evaluation form today to schedule your free, no-obligation consultation with a bankruptcy lawyer near you.