Getting Sued and Bankruptcy

December 31, 2020
Getting Sued and Bankruptcy

Many people that file for bankruptcy, do so because they are getting sued.  But does that really help, or is it too late?

Creditors often file lawsuits to aid them in the collection process.  When a lender is owed money, and the repayment terms are not met, a cause of action arises.  That cause of action can result in a lawsuit filed by the creditor against the borrower all for the purpose of helping the creditor collect on the debt it is owed.

Getting sued begins with a petition being filed.  The petition must be served on the party getting sued, and service of the petition includes a summons.  A petition and summons notify the borrower that a lawsuit has been filed against them and they now have a court appearance.  It is often at this point borrowers reach out to ask about the options available under bankruptcy.

The bankruptcy process, very generally, helps debtors manage their debt.  This can include discharging or getting rid of debt or altering repayment terms into more manageable payments.  In either case, one of the ways the bankruptcy process accomplishes this task, is by halting all collection activity and this includes lawsuits.

Filing a bankruptcy case stops the lawsuit proceedings no matter where it is in the process.  Whether a lawsuit is on the verge of being filed or has already resulted in a judgment, filing bankruptcy stops that lawsuit.  This is an important and powerful aspect of the bankruptcy code.  It allows borrowers the opportunity to stop collection actions that could otherwise result in garnishment.  So, getting sued does not mean it’s too late to look for help, however, it is a good indication that it is time to get help.

If you have questions about bankruptcy, contact our office today.