Filing Bankruptcy What Happens to Lawsuits
What is a Lawsuit
When you get behind on your bills, medical bills, credit cards, other loans, etc, first comes the collection letters and phone calls, then the civil lawsuits. A civil lawsuit is a court action which seeks a judgment for damages – the past due balance- interest, attorney fees, court costs, etc. A sheriff’s deputy knocks on your door or shows up at you job and serves you with a civil warrant or civil summons. Now you have to go to court, and face garnishment or levy of your bank account after a judgment is entered by the court, which will usually happen. How do you stop this endless cycle?
Does bankruptcy stop a civil lawsuit and the collection process?[important]With rare exceptions, Chapter 7 or Chapter 13 Bankruptcy will stop the lawsuit in its tracks, prevent the entry of a judgment and will stop garnishments or bank levies.[/important] [pullquote align=”left|center|right” textalign=”left|center|right” width=”30%”]A civil lawsuit [/pullquote]is the culmination of the collection process and like all other collection activity, upon the filing of a bankruptcy petition for either chapter 7 or chapter 13, the automatic stay prevents the continuation of a civil lawsuit or enforcement of a civil judgment. In certain cases, such as an allegation of fraud, or a domestic relations related lawsuit, the creditor may file a motion in the Chattanooga bankruptcy court and move the court to lift the bankruptcy automatic stay. If the automatic stay is lifted the civil suit continues in state court, then will usually return the the Chattanooga bankruptcy court after disposition – the entry of a judgment. In a chapter 7 the question of dischargeablility of the debt will arise, in a chapter 13 the judgment debt will be added in to the chapter 13 plan.
File Bankruptcy Before Entry of a Judgment
While it is true the bankruptcy will halt the collection process, including judicial proceedings, it is best to file for bankruptcy prior to the entry of a judgment, especially if you own real property. In Tennessee, a judgment creditor may file a certified copy of a civil court judgment in the Office of the Register of Deeds, and a perfected secured lien is created upon any real property that the debtor owns. Once a perfected security lien is created then it usually can not be discharged in bankruptcy, without surrendering the secured asset- your real property.
If you have been [pullquote align=”left|center|right” textalign=”left|center|right” width=”30%”]served with civil process[/pullquote] – a General Sessions Warrant or a Civil Summons – speak to a Chattanooga bankruptcy lawyer before the case is set to go to court. Contact Purple Law Firm in Chattanooga, Tennessee, to get the legal advice you need, develop a plan of action that works for you. Speak to a Chattanooga bankruptcy attorney to learn more about filing bankruptcy – what happens to lawsuits.