Can Bankruptcy Stop Lawsuits?

 

When you are having trouble paying your bills, the last thing you want is to be hit with a summons from a creditor stating they are filing a lawsuit against you.  The consequences could be severe, as losing the suit could mean the creditor could garnish your wages, freeze your bank account, place liens against your property, and proceed with aggressive collection actions, including seizure of your assets.

 

What Happens When Served with a Summons?

Ohio is a "general pleading state," so creditors only need to provide a general allegation of the debt to start the legal process and request a judgment for the amount they say you owe, plus interest and fees.  Once they do, you will be served with a copy of the summons and complaint, usually by certified mail.

 

The complaint will state why the debtor is suing you, the relief sought, and what court has jurisdiction.  The summons will list the names and addresses of the court, the parties to the lawsuit, and the date by which you must respond.

 

When you receive the summons, you have just 28 days to respond with an “answer” in writing. You must send the answer to both the opposing counsel and the court. The court will then issue a schedule of events for your case and dates by which motions must be filed.

 

If you make a mistake and do not respond correctly or on time, the creditor may ask for a summary judgment against you. This gives the creditors what was asked for and allows them to garnish 25 percent of your non-exempt wages, seize cash in your bank accounts, and put a lien against your personal property.

 

Stopping Lawsuits With Bankruptcy

While no one wants to file for bankruptcy, it is often the best option for many people.  This is because there is an automatic “stay” provision of the U.S. Bankruptcy Code. Once you file for individual bankruptcy through chapter 7 or chapter 13, your attorney will file a document called a Suggestion of Stay for each lawsuit and notify the creditor's attorney that a bankruptcy case has been filed.

 

Creditors must then stop pending lawsuits and cease making collection efforts against you. They do not have to drop their lawsuits, but the legal process must stop until the bankruptcy is over or until they get permission from the bankruptcy court to continue the suit. They must stop trying to collect the debt, and they also must stop calling you and harassing you during the bankruptcy proceeding, or they may receive sanctions from the court.

 

However, the stay is in place only until the bankruptcy is resolved.  After bankruptcy, some debts will be entirely discharged, including credit card bills, medical bills, utility bills, payday loans or personal loans. However, there are certain types of debts you will still have to pay, including:

  • Debts for personal injury or death caused by driving while intoxicated.
  • Student loans, unless it would be an undue hardship for you to repay.
  • Fines and penalties for violating the law, including traffic tickets and criminal restitution.
  • Recent income tax debts (within 3 years) and most other tax debts.
  • Debts you forget to list in your bankruptcy papers, unless the creditor learns of your bankruptcy.
  • Debts you owe under a divorce decree or settlement, including child support.

 

In bankruptcy, only debts that arose before the date of your bankruptcy filing will be discharged.

 

Consult an Attorney

Whether or not you are considering bankruptcy, as soon as you are served with a lawsuit you should get the assistance of an attorney to examine your possible defenses and make sure that you respond properly. An experienced debt-relief lawyer will help you determine the proper course of action, make sure the creditor provides proper evidence, and try to keep unsubstantiated evidence out of court.

 

 

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