Is It Legal To File A Chapter 7 To Stop A Lawsuit?

Is it legal or appropriate to file a bankruptcy after you have been served with a summons/lawsuit for a debt you owe? The answer is yes, absolutely. People often ask me this question thinking once you have been personally served with a summons/lawsuit it may be too late to file for bankruptcy. Filing for bankruptcy will stop a debt lawsuit in its tracks regardless of what stage the lawsuit is in.

Leaving bankruptcy out of the equation for a moment, when you are served with a lawsuit the summons information says you have 30 days to file your response with the court. To file a responsive document with the court it will cost you, on the average, several hundred dollars in civil court filing fees. In addition you must prepare an appropriate responsive document sometimes called an answer. If you do not file an answer to the lawsuit then the creditor suing you will request a default and obtain a judgment for the amount owed. With this judgment the creditor can do a number of evil things to you, such as levy your bank accounts (completely drain your bank account of all the money), garnish your paycheck (take 25 percent of your net earnings per paycheck until the entire judgment is paid), file liens against your property and a host of other things. If you do actually go to the trouble of filing an answer to the lawsuit you will probably slow down the process somewhat, but if you owe the money the creditor will obtain a judgment against you and do all the things I have mentioned. You cannot attempt to reason with the creditor or complain to the judge. It will do no good. If you owe the money, pursuant to the agreement you signed with the creditor, they will obtain a judgment and do one or all of things I have mentioned. You will not talk your way out of it by claiming to not have enough money or you are ill or you have a family to support. Once again these tactics will do you no good. If you owe the money and they have sued the right person they will obtain a judgment that you must pay.

All of this can be avoided by filing for bankruptcy. The creditor that has filed the lawsuit must immediately stop, as once you file for bankruptcy, you are protected by the powerful federal bankruptcy automatic stay which trumps all other court cases. Even if you have been notified by your bank of a bank levy, or notified by your employer that your wages will be garnished, etc., your filing for bankruptcy will immediately stop all of this. Many people believe if they simply ignore the fact they have been sued somehow it will just go away. If you ignore a lawsuit served on you it may even seem like it has gone away. However, months later, when you least expect it, you will receive notice of a bank account levy or wage garnishment. Usually, if you work very fast you can file for bankruptcy prior to the creditor taking much of your hard-earned money. When you receive notices of a bank levy or wage garnishment, it is sometime very difficult to prepare a bankruptcy filing in time to stop all the damage that will occur. When you find out you are being sued it's time to either pay the creditor, or if that is not an option, file for bankruptcy to completely discharge the debt.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.