Is it too late to file for bankruptcy once I’ve been sued?
When you’ve been sued over past-due debts, it’s natural (and wise) to consider your bankruptcy options. It’s not too late at the point you’re sued to consider this option, and in fact, it’s more important than ever. But bankruptcy isn’t for everyone, and that’s why you should consult with a bankruptcy attorney, like those at Cornerstone Law Firm, when deciding whether to file.
Here are some factors to consider when deciding whether to file for bankruptcy after being sued:
- Timing of the lawsuit: If the lawsuit has already been filed and a judgment has been entered against you, it may be more difficult to discharge the debt in bankruptcy, as the debt is now considered a “judgment.” You’re also not permitted to re-litigate a case in bankruptcy court that has already become a judgment in state court. On the other hand, if the lawsuit is still in the early stages and no judgment has been entered, it may be possible to dispute the debt or even discharge the debt in bankruptcy.
- Type of bankruptcy: If you file for Chapter 7 bankruptcy, the debt from the lawsuit may be dischargeable. If you file for Chapter 13 bankruptcy, the debt from the lawsuit may be included in the payment plan and paid off over time if the debt is not dischargeable.
- Exemptions: You may be able to use the bankruptcy exemptions to protect your assets from being seized to pay off the debt from the lawsuit. If you have already been sued and a judgment has been entered, you may be able to use the bankruptcy exemptions to protect your bank accounts and personal property from being “levied.”
- Automatic Stay: When you file for bankruptcy, an automatic stay goes into effect that prevents creditors from taking any further collection action, including filing new lawsuits or proceeding with existing lawsuits.
In conclusion, it is not necessarily too late to file for bankruptcy once a you have been sued. The timing of filing the bankruptcy and the type of bankruptcy can impact the outcome of the lawsuit and the discharge of debt. As the consumer, you may be able to use exemptions to protect your assets and the automatic stay may prevent further collection action. Always seek legal advice from an experience attorney before making important decisions like these. Call us at Cornerstone Law Firm to discuss your bankruptcy options.