Financial difficulties and hard times have caused a credit card company to file a lawsuit against you. After careful review of your finances and a consultation with a knowledgeable bankruptcy attorney, you have decided that bankruptcy is your best option. While this is most definitely NOT the end of the world there are some questions to consider in regards to the lawsuit.
What happens now with that lawsuit pending from the credit card company? A bankruptcy petition may stop or at least delay that case depending upon the claims in the case and whether the petition is for a Chapter 7 or Chapter 13 Bankruptcy. Let’s look at how a bankruptcy may impact a credit card lawsuit.
- One of the first things that happens with a bankruptcy petition, once it has been filed with the court, is the automatic stay. This means what is says . . . upon the filing of your personal bankruptcy, all actions pending or contemplated against a debtor are automatically stayed; this includes that lawsuit which, upon your filing, becomes inactive, prohibited to go forward without an order of the Bankruptcy Court. As a result, the lawsuit is stayed and most likely of no consequence once you have received your discharge.
- A chapter 7 bankruptcy, also known as liquidation is where a trustee analyzes your debts and assets and liquidates your assets if any are not exempt while your debts get discharged. This generally means that the credit card debt will be discharged. In that case the creditor can no longer collect the debt from you so the annoying lawsuit will normally be dismissed.
- In Chapter 13 bankruptcy, you pay a portion of your debts through a repayment plan over a three to five year period. The credit card lawsuit therefore, is stopped by the automatic stay and the debt is treated the same as your other unsecured debts such as other credit card debt and medical bills. However, if you fail to make plan payments and your case gets dismissed prior to you receiving your discharge, the automatic stay will end and the lawsuit will resume.
As with all bankruptcy cases it is best to seek the advice of a qualified attorney who can tell you how your case will be handled along with how your bankruptcy petition will impact your lawsuit.