Bankruptcy and Lawsuits
By Rogena Jan Atkinson, Attorney at Law
Did you know that when you file bankruptcy you can stop a lawsuit? If you have been sued, you might want to consider bankruptcy as an option to stop the lawsuit. Sometimes filing for bankruptcy can be the best option to deal with a lawsuit. Bankruptcy can prevent the "plaintiff" or party suing you from ever getting a judgment. One of the most powerful benefits of filing for bankruptcy is the Automatic Stay. This stay automatically stops most legal proceedings and collection actions against you. So simply put, filing for bankruptcy will stop a lawsuit.
There are thousands of lawsuits filed everyday throughout the United States. There are also thousands of bankruptcy cases which are filed to stop lawsuits as well as prevent judgments from being entered. Many lawsuits end up going to trial, while others go all the way up to trial and the defendant ends up filing for bankruptcy. Some lawsuits are dismissed while others settle without the defendant ever filing for bankruptcy. Whether personal or business, bankruptcy filings are often motivated by lawsuits.
The service of a lawsuit or scheduling of an upcoming trial often prompts a defendant to consider filing for bankruptcy. Depending on the facts of the case and what causes of action are alleged in the lawsuit, the best option may be to file for bankruptcy, and prevent the plaintiff, or the party suing you from ever getting a judgment. Sometimes, it's a better option to defend a lawsuit if you have defenses or a good chance of winning the lawsuit. Only you can decide. It's always good advice to consult with an experienced attorney when you have been sued. Getting legal advice from a bankruptcy lawyer in your area can help you make an informed decision whether to defend the lawsuit or file for bankruptcy.
If you've been sued, it is very important to respond to the lawsuit within the statutory time to do so, or a default judgment may be entered against you. Depending on the causes of action, a default judgment can have a very negative affect if it is allowed to happen. For example, if the lawsuit is alleging fraud, or arises out of an intentional tortious act or injury, then it is not going to be dischargeable in a bankruptcy. That means it can follow you forever or until it's paid. It may be that you actually have defenses to the lawsuit which can be asserted and that may allow you to have the lawsuit dismissed and collect your attorney's fees for having to defend the lawsuit. Additionally, you may have a counterclaim against the party who sued you, which if you win, might pay for any damages you may have incurred as well as your costs and attorneys fees required to prosecute the counterclaim.
If by chance the lawsuit against you is from a creditor like a credit card company or collections agency, and you do owe them something, you may still have defenses. For example, the creditor may be suing for the wrong amount, the statute of limitations to collect has passed, or the creditor may have added to the balance things that may not be allowed by law. Whatever the case is, make sure you have obtained legal advice as to how to proceed.
Filing for bankruptcy will stop a lawsuit and can take the pressure off allowing you to keep your property as allowed by law under the State or Federal Bankruptcy exemptions. A lawsuit can be very stressful and costly, and whether the cost is financial or emotional, a lawsuit shouldn't be ignored, since doing so can make things even worse. Most people don't even bother defending a lawsuit or get legal advice. It could end up that they don't understand the legal system, or they feel that they can't really afford to address the lawsuit.
Filing for Bankruptcy to Stop a Lawsuit is good for some people and bad for others. Depending on your assets, your financial ability, and of course the facts of the bankruptsy case, there might be more effective means to deal with a lawsuit as opposed to immediately filing for bankruptcy. Some types of lawsuits such as those that involve criminal prosecution or suits to collect child support are not affected by filing bankruptcy. Every lawsuit has a different set of circumstances, as does every person being sued, so it is always good advice to seek legal counsel if you have been sued. Contact a local bankruptcy lawyer to discuss the facts about Lawsuits and Bankruptcy, and to determine what your legal options are to deal with the lawsuit.
