If you are behind on your bills, you undoubtedly are being bombarded with phone calls and letters from your creditors and collection agencies. They want their money and they want it now.
But what happens if you just can’t pay? Some of them will write off what you owe them as bad debt. Others will file a lawsuit against you. When you are served with a lawsuit, you have two options:
- Defend it; or
- Do nothing.
Bankruptcy attorneys always recommend that you defend a lawsuit filed against you by one of your creditors. Even if you believe you owe the creditor something, you may not owe what the creditor says you owe. If you go to court and defend the lawsuit, the creditor will have to prove how much you owe. If the creditor cannot prove it, the case may be thrown out or the court will only award the creditor a portion of the amount it sued for. If you don’t defend the lawsuit, the court will enter a default judgment.
If you defend the lawsuit and lose or the court enters a default judgment against you because you did not defend the lawsuit, the creditor is free to pursue all legal collection remedies against you. This means the creditor can:
- Garnish your wages;
- Levy your bank account; and
- Levy on any other property you own.
Additionally, a judgment becomes a lien against all of your property, including your home. Before you can sell any property which is subject to the judgment lien, you must pay the judgment in full and obtain a release of lien from the creditor. To make matters worse, interest will accrue on the judgment until you pay it off. . . And the judgment will go on your credit which can make it difficult to obtain new credit and may impact your ability to get a job, get a security clearance, and obtain insurance.
The good news is that you don’t have to be at the mercy of a creditor who is suing your or who has already obtained a judgment against you. There is a way to instantly stop the lawsuit or to stop the creditor from dipping into your bank account or taking your car and other property to satisfy the judgment.
The way to stop your creditors’ efforts to get money you cannot afford to pay is to file bankruptcy.
If a lawsuit is pending against you when you file bankruptcy, the automatic stay prohibits the creditor from moving forward with the lawsuit; the Bankruptcy Code requires the creditor to dismiss the lawsuit or face sanctions for contempt of court. If the lawsuit was for a credit card bill, medical bill, or other unsecured debt and you file a Chapter 7 case, the debt will be wiped out completely. If you file a Chapter 13 case, depending on your monthly income and expenses, you may have to pay a portion of the debt. But it’s also possible that you won’t have to pay any of it. And the other thing is that once you file bankruptcy, interest will no longer accrue and the creditor is prohibited from charging late fees and over the limit fees.
If a creditor has already obtained a judgment against you by the time you file bankruptcy, that judgment will be treated as a secured debt. But the good news is that the Bankruptcy Code allows you to avoid certain judgment liens if they impair an exemption. This means that the judgment could potentially be erased and the debt will be treated like a general unsecured debt. That’s right. . . you may be able to wipe it out entirely.
If you have been served with a lawsuit or have had a judgment entered against you, you are probably at your wit’s end worrying about what will happen next to drop you deeper into the financial abyss. Well, your situation is not hopeless! A bankruptcy attorney will review your situation and give you truthful answers to all of your questions. Bankruptcy professionals are committed to helping you solve your financial problems and move on with your life. So, give us a call today!