Can a Chapter 7 Bankruptcy Help You Avoid a Civil Lawsuit?

Law Blog

After exhausting efforts to recover payment on a debt, your creditor could choose to take you to court. A loss in the civil court could result in wage garnishment, seized assets, and damage to your credit. If you are facing a lawsuit, here is what you should know.

What Can You Do to Stop the Lawsuit?

Unless you have the funds to pay off the debt, chances are, you have very few options available when it comes to stopping the lawsuit. One option that could be beneficial in many ways to you is filing for a Chapter 7 bankruptcy.

The moment you file for bankruptcy, you have a couple of advantages given to you over your creditor. The first is that you are given an automatic stay. The stay will prevent the creditor from filing the lawsuit against you.

The second is that you have the leverage to potentially force the creditor to negotiate the debt. If your bankruptcy continues, the debt will likely be discharged when the process is complete. The creditor will lose out on the funds and you get a clean slate to start over. In most instances, creditors just want to be paid. If negotiating the debt can keep the case out of bankruptcy court, they might do it.

What If You Have Already Lost the Lawsuit?

If the creditor did take you to court and won a judgment against you, filing for a Chapter 7 bankruptcy could still help you. The automatic stay would prevent the creditor from taking any action to collect on the judgment. Even if the creditor is already doing things, such as garnishing your wages, the actions must stop.

You can probably still get the debt discharged, too. If the debt fits certain requirements, such as being from an unsecured creditor, you can likely get rid of it. If the bankruptcy court discharges the debt, it is removed from your credit file and you no longer need to worry about it.

Even if the debt is not discharged, the automatic stay gives you the breathing room to either negotiate with the creditor so that you can stop the garnishments or save the funds to pay off the debt.

To explore filing for a Chapter 7 bankruptcy and to find out about other options available to you, consult with a bankruptcy attorney like one of the professionals at Price James S & Associates. He or she can review your financial situation and help determine the best option for you. 

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10 July 2017

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