Both being sued by a creditor and bankruptcy can feel like scary situations, but rest assured, filing for bankruptcy can help. Once bankruptcy is filed, whether it’s under Chapter 7 or Chapter 13, an automatic stay prevents debt collectors from taking further legal action. Does bankruptcy clear lawsuit debt? Read on to answer this question and more regarding your bankruptcy situation. Keep in mind that although you can file for bankruptcy if you’ve lost a lawsuit, it’s best to file in advance to simplify matters and protect your assets.
Can a Creditor File a Lawsuit Against Me?
Creditors can, and most likely will, take you to court if you owe a debt such as a credit card or medical bills and cannot pay. Judgment creditors can actually take money right out of your bank account, garnish wages from your paycheck, and put a lien on your real estate in order to collect what you owe. Bankruptcy can help protect this from happening.
Will Filing Bankruptcy Stop a Civil Lawsuit?
It’s important to note that bankruptcy can help in most civil lawsuits, but not all; there are limitations. Bankruptcy does not stop the following types of cases:
- Criminal cases
- Domestic proceedings regarding divorce or dissolution
- Child custody, child support
- Establishing paternity
- Evictions in which the state court already granted a writ of possession to the landlord
The automatic hold will take effect in other civil cases:
- An outstanding credit card balance
- House foreclosure
- Eviction in cases in which and order of possession has not yet been issued to the landlord
- Debt due to a breach of contract
Does Filing for Bankruptcy Help with Liens?
First, it’s necessary to understand what exactly a lien is. A legal judgment could establish a lien against your real estate. If you don’t repay it, it’s their right to seize the real estate through a foreclosure action. Judicial liens are sometimes avoidable in bankruptcy. However, it is very important to speak with a bankruptcy attorney before the judgement is issued in a lawsuit so that you have the best chance at mitigating the effects of a judgement on your property.
If you are served with a lawsuit due to owing debt, the best decision you can make is to file for bankruptcy. Creditors can’t get a lien if they don’t have a money judgment at the time you file for a bankruptcy case, meaning you won’t have to request that the bankruptcy court remove it.
Can I File for Bankruptcy After Losing a Lawsuit?
As stated above, filing bankruptcy after losing a lawsuit is better done sooner rather than later to avoid creditors placing liens on your property or getting a wage garnishment started against you. However, if you lose your lawsuit, you can actually still file for bankruptcy and, in most cases, discharge your legal liability on the debt.
Sawin & Shea Can Help You Clear Lawsuit Debt Through Bankruptcy
Bankruptcy is never an easy situation to navigate. Let Sawin & Shea, LLC guide you through the process and help you clear lawsuit debt. We are committed to providing compassionate and non-judgmental representation to all of our clients. Our attorneys have helped thousands of people just like you get the fresh start they deserve.Speak to an attorney today at (317) 759-1483. Or contact us online.