Sued by Creditor After Filing Bankruptcy? Here’s What to Do

You filed for bankruptcy to escape crushing debt. Now a creditor is suing you anyway. Should you show up to court? The answer depends on your bankruptcy filing status.

Does Bankruptcy Protect You From Debt Collection Lawsuits?

Yes, it does.

When you file bankruptcy, an automatic stay immediately stops most collection actions. Creditors must halt lawsuits, wage garnishments, and phone calls. But timing matters.

You may have struggled with finances for months before filing. Some debts got charged off and sent to collections. Collection agencies might have already filed lawsuits against you.

Your response depends on two factors. First, when is your court date? Second, have you officially filed your bankruptcy case?

You Haven’t Filed Your Bankruptcy Case Yet

Gathering documents takes time. Completing bankruptcy forms requires careful attention. You might receive a lawsuit summons before filing your case.

If your court date arrives before you file, you must attend. Answer the summons and show up to the hearing. Judges grant default judgments when defendants don’t appear.

A default judgment happens automatically. You lose without a fight. Creditors can then garnish wages and freeze bank accounts.

Tell the court you’re planning to file bankruptcy. Include this information in your written response. Most judges appreciate knowing your situation.

Our partner Solo can help you respond to the lawsuit properly. You’ll protect your rights while finishing your bankruptcy paperwork.

You Filed Close to Your Court Date

You filed bankruptcy just days before your scheduled hearing. Should you still attend?

Yes, attend the hearing anyway. Inform the judge and creditor’s attorney about your bankruptcy filing. Bring your bankruptcy case number with you.

Better yet, call the court clerk before your hearing. Explain that you filed bankruptcy recently. The clerk might cancel your appearance requirement.

Different courts handle this situation differently. Some require appearance regardless. Others dismiss you immediately. Calling ahead saves you time and uncertainty.

Always have your case number ready. Courts need this information to verify your filing.

Notify the Creditor’s Attorney About Your Bankruptcy

You filed bankruptcy weeks before your court date. The automatic stay should protect you. But you must inform the right people.

Businesses can’t represent themselves in court. You need to contact their attorney. Find the lawyer’s information on your summons and complaint.

Call the attorney as soon as you receive your case number. Explain that you filed bankruptcy. Provide your case number. Most attorneys will immediately halt proceedings.

Attorneys face serious consequences for violating the automatic stay. They typically respond quickly to bankruptcy notifications.

Contact the Court Clerk Too

Don’t rely solely on the creditor’s attorney. Call the court clerk’s office directly. Request a notation in your case docket.

The creditor must stop the lawsuit. But informing the court protects you double. Court staff appreciate early notification.

Provide your bankruptcy case number to the clerk. Ask about next steps. Some courts require written notification. Others accept phone calls.

What Happens After You Notify Everyone

The lawsuit should stop immediately. The automatic stay prohibits most collection actions. Creditors who continue face penalties.

Your bankruptcy case will include the debt from the lawsuit. You’ll list the creditor on your bankruptcy schedules. The debt gets discharged along with your other qualifying debts.

The creditor might file a proof of claim. Claims help creditors receive payment from liquidated assets. But most Chapter 7 cases are no-asset cases.

You’ll complete your bankruptcy without worrying about the lawsuit. The discharge eliminates the underlying debt. The lawsuit becomes moot.

Understanding the Automatic Stay

The automatic stay is powerful protection. It activates the moment you file bankruptcy. No additional paperwork is needed.

The stay stops:

• Collection calls and letters
• Wage garnishments
• Bank account levies
• Pending lawsuits
• Foreclosure proceedings
• Vehicle repossession

Creditors who violate the stay can be sanctioned. Courts take violations seriously. You can recover damages for willful violations.

The stay isn’t permanent. It lasts until your discharge or case dismissal. But it gives you breathing room to reorganize finances.

What If the Creditor Continues the Lawsuit

Most creditors stop immediately after notification. But mistakes happen. Some creditors might continue collection efforts.

Document everything. Save voicemails and letters. Record dates and times of phone calls. Note who you spoke with.

Contact your bankruptcy attorney immediately. Attorney fees for pursuing stay violations often get paid by the violating creditor.

The bankruptcy court can hold creditors in contempt. Judges can award actual damages, attorney fees, and sometimes punitive damages.

Should You Hire an Attorney

Bankruptcy is complex. Facing simultaneous lawsuits adds complications. An experienced attorney navigates both processes.

Attorneys ensure proper notification to all parties. They handle communications with creditor lawyers. They protect your rights throughout the process.

Many bankruptcy attorneys offer free consultations. You can discuss your specific situation. They’ll explain how bankruptcy affects your pending lawsuit.

If you’re considering bankruptcy, our partner Solo can connect you with experienced professionals. You’ll get guidance on both your lawsuit and bankruptcy case.

Timing Your Bankruptcy Filing

Strategic timing can make a difference. Filing before a judgment gets entered prevents additional complications.

Judgments create judgment liens on property. Liens can complicate bankruptcy. Some liens survive bankruptcy discharge.

Don’t rush your bankruptcy filing just to beat a lawsuit. But don’t delay unnecessarily either. Complete your paperwork thoroughly but quickly.

If your court date is approaching, communicate with the creditor’s attorney. Many will postpone hearings if you’re actively preparing bankruptcy paperwork.

Types of Debts in Lawsuits

Not all debts are dischargeable in bankruptcy. Understanding your debt type matters.

Dischargeable debts include:

• Credit card balances
• Medical bills
• Personal loans
• Collection accounts
• Utility bills

Non-dischargeable debts include:

• Recent taxes
• Student loans (usually)
• Child support
• Alimony
• Debts from fraud

If your lawsuit involves non-dischargeable debt, bankruptcy won’t eliminate it. You’ll still owe the debt after your case concludes.

Preparing for Your Court Hearing

You must attend if you haven’t filed bankruptcy yet. Preparation helps you present your situation clearly.

Bring all relevant documents. Include the summons, complaint, and any correspondence. Bring proof of your bankruptcy filing progress if possible.

Dress professionally. Arrive early. Court staff can answer procedural questions.

Explain your situation honestly. Judges appreciate straightforward communication. Mention your plans to file bankruptcy soon.

Ask about continuances if you need more time. Many judges grant brief delays when debtors are actively pursuing bankruptcy.

After Your Bankruptcy Discharge

Your discharge eliminates eligible debts permanently. Creditors can’t restart lawsuits for discharged debts.

You’ll receive a discharge order from the bankruptcy court. Keep this document safe. It’s proof that debts were eliminated.

If a creditor contacts you about a discharged debt, send them a copy. Remind them that the debt was discharged in bankruptcy.

Continued collection efforts after discharge violate federal law. Contact a bankruptcy attorney if this happens.

Rebuilding After Bankruptcy

Bankruptcy gives you a fresh financial start. But rebuilding takes effort.

Your credit score will initially drop. But bankruptcy removes crushing debt burdens. You can start rebuilding immediately.

Secured credit cards help rebuild credit. Small installment loans also help. Make all payments on time.

Monitor your credit reports regularly. Ensure discharged debts show correct status. Dispute any errors you find.

Bankruptcy stays on credit reports for seven to ten years. But its impact diminishes over time. Responsible financial behavior matters more.