If your financial situation has deteriorated, you may be suffering from any number of ways creditors use to make your life miserable. When you don't pay a bill, for example, it can get turned over to a collection agency. Once that happens, you can expect to be contacted on a continuous basis until you pay up. Things can get worse, however – you might be involved in a lawsuit. If you are considering a chapter 7 bankruptcy filing in an effort to avoid punitive actions like lawsuits, read on to find out more.
Say Goodbye to the Lawsuit
While not every single type of lawsuit will be dismissed with a bankruptcy filing, lawsuits from certain creditors may well be. If you have been sued by credit card issuers, medical billing entities, and other unsecured debts, you are in luck. As long the suit has not already ended and a court judgment handed down, the suit will disappear along with the debt that caused it. You can also stop a civil case brought by a government agency in its tracks. If you are being sued due to an overpayment of Social Security or unemployment benefits, the case will be placed on hold and the bankruptcy trustee will make the decision. A word of caution, however—if you lost a suit from a creditor and was ordered to pay a sum of money, nothing can be done. It's best to file your bankruptcy before any creditor lawsuits can be complete.
Divorce and Criminal Matters
If you are involved in either one of the above, your bankruptcy will have little to no effect on the suit. You should, however, speak with your divorce and bankruptcy attorney about the effect one will have on the other.
When You Are in for Some Money
If the shoe is on the other foot and you are suing someone, your winnings in the case might be subject to bankruptcy asset seizure rules. For example, if you were in a car accident and the at-fault driver agreed to pay you for your damage or you won the case in court, the judgment should be listed as part of your personal property. If your exceptions don't allow you to keep it, you must surrender it. Note: wait until after your bankruptcy is final to file any lawsuits (statute of limitations notwithstanding).
The benefits of filing for bankruptcy stack up on the positive side for many filers, so be sure to discuss any pending legal matters with your chapter 7 bankruptcy attorney.