Bankruptcy and Pending Lawsuits or Existing Judgments
Birmingham Attorneys putting a stop to lawsuits and erasing judgments in Pell City, Mountain Brook, Chelsea and all of Alabama
A common way that creditors attempt to recover the balance of unpaid debts is by suing the debtor for the deficiency in court. Such creditor lawsuits are often the substance of threatening or harassing calls to debtors who are behind on their payments, and can be an endless source of worry and frustration. When a debtor files for bankruptcy relief, the automatic stay operates as an injunction against any suit to collect a debt. This protection extends to both potential suits that a creditor could have filed before the bankruptcy began, as well as pending suits that already existed before the debtor filed for bankruptcy.
When a lawsuit to recover a debt is pending before a court, filing bankruptcy basically puts that case on hold until the bankruptcy is resolved. When you file for bankruptcy, notice of the bankruptcy petition will be sent to all your creditors, as well as the court in which any current suits are pending. Once a judge learns that the debtor has a pending bankruptcy, the case will most likely be continued until the bankruptcy is resolved. This is because an essential element of any creditor action is proving that a debt is actually owed. If the debt is successfully discharged in bankruptcy, then it legally no longer exists, thus a creditor would not be able to recover on it in court. However, if the debt is deemed non-dischargeable, then the creditor may continue to pursue the claim after bankruptcy.
If you’ve lost a civil case and had a judgment issued against you, then you have to pay it. That is, unless you can’t pay it. If the judgment would wipe you out financially, you have the option of filing bankruptcy to discharge that judgment debt, meaning you won’t owe anything on the judgment anymore. This will also prevent the judgment creditor from levying against your assets or garnishing your wages.
If creditors are threatening to take you to court or have already instituted claims against you, it is extremely important that you contact an experienced debt relief attorney as soon as possible to discuss your options. Contact the experienced bankruptcy team at Parkman White, LLP today for a free consultation at 205-502-2000.