Filing Bankruptcy With A Pending Lawsuit

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Filing Bankruptcy With A Pending Lawsuit

If you file bankruptcy with a pending lawsuit, the legal action against you will come to a halt pursuant to the Automatic Stay in bankruptcy. This means the creditor attempting to turn your debt into a judgment they can execute will be prevented from taking further action. Any attempt to do so would amount to an Automatic Stay Violation. This is true so long as the Automatic Stay is in effect, and will be true ongoing, provided you receive a Discharge in your Chapter 7 or Chapter 13 bankruptcy filing.

When Debts Escalate To Lawsuits

It is one thing to be behind with a creditor. It is another thing entirely to be faced with a lawsuit filed by a creditor. Presumably, the creditor is pursuing a judgment in court. With a judgment in place, the creditor has more ways to attempt to collect on their debt. These include potential wage garnishment, forced sale of assets, and foreclosure.

In a past article, Is The Sheriff Coming To My House?, we addressed the process by which a creditor can attempt to enforce their judgment once they obtain one in court. However, by filing bankruptcy you will invoke the powerful protection of the Automatic Stay and prevent the creditor from moving forward.

Notifying The Lawsuit Creditor Of Your Bankruptcy

In a past article, we discussed Who Will Notify My Creditors When I File Bankruptcy? However, this instance is more specific and relates to making sure a legal action against you comes to a halt prior to a judgment being placed on record. While the federal bankruptcy court will send notice of your bankruptcy to your creditors, we make sure to notify the lawsuit creditor immediately upon filing the bankruptcy. We also send notice to the county courthouse where your proceeding is most likely filed. This alerts the county court system that a bankruptcy has been filed and the case must come to a halt until further notice.

Filing An Emergency Bankruptcy Petition

You may choose to file an Emergency Bankruptcy Petition in order to prevent a creditor from obtaining a judgment. This is a process by which you are allowed to file bankruptcy prior to having all the paperwork completed. The court then gives you fourteen days to file the remainder of the paperwork- don’t worry, our office assists with meeting all of the emergency bankruptcy filing requirements to make sure your bankruptcy petition is not dismissed.

What If My Creditor Does Obtain A Judgment?

If filing bankruptcy with a pending lawsuit doesn’t work out and your creditor gets a judgment before you file, that’s ok. We can file a motion together with your bankruptcy filing, to have the judgment removed from your record. This means that when you sell your real property (your house), you will not have to pay the judgment. This analysis is case by case and is specific to each debtor and the amount of equity you have in your home; however, we can give you an answer very quickly as to whether you would qualify for this relief.

Speak With A Charlotte Bankruptcy Lawyer Today

If you are considering filing bankruptcy, it’s important that you speak with a Charlotte bankruptcy attorney. The call is free and you will come away with a much better understanding of your options. You can reach us at 704.749.7747 or click to request a FREE CASE EVALUATION, and we will be in touch shortly.

Further Reading

If this article was helpful, you may find other helpful articles on our Bankruptcy Blog. Thank you for visiting the website—we hope it has been helpful.