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Bankruptcy Can Stop a Lawsuit …

If you have been sued, contact the Texas Bankruptcy Lawyer R.J.Atkinson for a free bankruptcy evaluation, and a free bankruptcy means test to see what options you may have to address the lawsuit. It is important to obtain legal advice as soon as you are served as you must respond to the lawsuit within the statutory time to do so or a default judgment may be entered against you.

Every day in Houston, Austin, Dallas, San Antonio, Waco, Victoria, and all throughout Texas, defendants are served with lawsuits for various causes of action. There are all types of lawsuits involving many different theories of law which range from debt from credit cards to negligence in auto accidents, and from fraud claims to child support arrears. When a person who is already knee deep in debt receives a lawsuit from a constable or a process server, they often consider filing for bankruptcy as a way to stop the lawsuit. Oftentimes, a lawsuit can be a primary predictor of a bankruptcy filing. In fact, many Texas lawsuits are disposed of in bankruptcy.

As a Texas Bankruptcy Attorney having helped thousands file for bankruptcy relief, I have seen a number of bankruptcy filings that were motivated by the service of a lawsuit. The motivations for filing bankruptcy in response to a lawsuit have included the potential judgment liabilities, the legal fees associated with defending the lawsuit, as well as the stress associated with the entire litigation process. A lawsuit can often be the deciding factor to file for bankruptcy when someone has been struggling with their finances for sometime. The thought of completely eliminating the lawsuit along with their overwhelming debt, while obtaining a fresh financial start can be an appealing option.

Filing bankruptcy to stop a lawsuit can also be the most cost effective option depending on the circumstances, since the costs of bankruptcy are usually a fixed fee, while lawsuits are billed by the hour and don’t have a specific time frames to be completed, fixed costs, or final outcomes. Lawsuits can go on for years, and can rack up hours and hours of billings and expenses, not to mention the fact that they can be appealed. Filing for bankruptcy to stop a lawsuit can give closure to the plaintiff’s claims. In a Chapter 7, the discharge in bankruptcy will eliminate the lawsuit so that it can’t be brought against you again. If the lawsuit is dischargeable then it’s done and over with for good.

If you live in Austin, Dallas, Houston, San Antonio, or anywhere else in Texas and have been sued, or there is already a lawsuit pending against you that you cannot afford to defend, it may be a wise course of action to consider filing for bankruptcy protection. At the very least, exploring your options in bankruptcy to address the lawsuit can’t hurt. The filing of a bankruptcy would stop the lawsuit from proceeding any further against you and would cease all attempts to collect on any future judgment the plaintiff or suing party could obtain.

When a bankruptcy case under any chapter of the Bankruptcy Code is filed, the Bankruptcy Court issues an automatic stay, or injunction to any action against the debtor (the person or entity filing for bankruptcy) pursuant to section 362 of the Bankruptcy Code. Once the automatic stay goes into effect, most creditors CANNOT take any further action against you without permission of the Bankruptcy Court. If they do, they can be subject to sanctions and possible criminal violations if they knowingly & intentionally violate the automatic stay. Unless the lawsuit arises from a criminal action, or is a matter of child support or a paternity suit, filing for bankruptcy will most always stop the lawsuit.

If you have been sued and are considering bankruptcy ask yourself the following:

What happens if I don’t do anything?

If you just ignore the lawsuit it probably won’t go away. By doing nothing, the plaintiff can obtain a default judgment against you. After the judgment is entered, the plaintiff can then file a lien against your assets, seize your personal property, levy your bank accounts, and garnish your wages. Although this process takes some time, it can make for a difficult way of life down the road. If the lawsuit alleges fraud or intentional tortious conduct, then doing nothing could allow the judgment to follow you until paid and it will not be dischargeable in a bankruptcy proceeding.

Depending on how much exempt property you have the judgment creditor may not be able to obtain anything despite the judgment, but judgments are public records, and as such are often reflected on your credit report for up to ten years. This can have a very negative effect on your credit and ability to obtain future credit.

Can filing for bankruptcy stop a garnishment on a judgment against me?

The filing of a bankruptcy will terminate any garnishments from wages you earned after the filing of the bankruptcy. Not before. You may be able to recover wages earned before the bankruptcy filing if those wages would have otherwise been exempt. When a garnishment is for child support arrears, the outcome will depend on which chapter of bankruptcy is filed and what support became due prior to the filing of the case.

What if I answer the Lawsuit?

In some cases, it may be the best option to answer a lawsuit. Especially if you have any defenses, a good chance to prevail, or have a counterclaim against the plaintiff. Also, if you can afford it both financially and emotionally, then it may be a good option to answer the lawsuit. If you believe you have a counterclaim or a good defense then you should seek the advice of an attorney. Although you don’t need an attorney to respond to the lawsuit, it is important to properly answer the lawsuit and abide by the Texas Rules of Civil Procedure. If you are attempting to overcome allegations filed by an attorney, then unless you know what you’re doing, you may cause yourself more problems by representing yourself. This can also be true if you have a counterclaim as you must assert the proper cause or causes of action.

Keep in mind that if you don’t answer in the statutory time to do so, then the law presupposes that you are in agreement with the allegations contained in the lawsuit. In other words, since you haven’t opposed them, they must be true.

What happens if I answer the lawsuit but lose the case?

That depends on the particular facts, allegations, and relief requested in the lawsuit. If the lawsuit demanded the return of a secured item like a home in a foreclosure proceeding, the creditor could sell the property at a foreclosure sale. If a creditor filed suit demanding money for an unpaid car repossession deficit and you lost the suit, a judgment against non-exempt personal property such as a bank account could be levied for the dollar amount plus interest, and court costs. If the lawsuit alleges fraud or intentional injury and you lose the suit then you could be facing much more serious consequences.

There are endless possibilities, but remember that even if you lose a lawsuit and a creditor gets a judgment, you can always appeal the judgment if you have legal grounds to do so. Alternatively you can negotiate with the creditor for the payment of the judgment. Even after a judgment is entered against you, a creditor still has to incur more legal expenses to actually collect or enforce the judgment. As such, you can sometimes negotiate a lesser amount on the judgment for settlement. If you lose the case and are eligible, then filing for bankruptcy may be an option to eliminate the judgment. In cases involving non-dischargeable debts such as those of fraud or tortious conduct, bankruptcy is not an option to discharge the debt. Bankruptcy may however allow you to repay it over time. Only you can weigh the options after consulting with an experienced bankruptcy attorney.

If I let the plaintiff get a judgment can I still get rid of it in a bankruptcy?

In most cases, a debt in the form of a judgment or from a judgment creditor is considered just as dischargeable as the debt was prior to the entry of the judgment.

If the judgment was enforced against real property or if it is a judgment lien that has been attached to an asset like you homestead, it can be avoided if it impairs your homestead exemption. Likewise, if the judgment lien is on your personal property, bank accounts, etc… then it can also be avoided to the extent of the exemptions available to you. However, if the plaintiff alleged fraud or intentional tortious conduct, then allowing the plaintiff to obtain a judgment could likely make the judgment non-dischargeable in a bankruptcy proceeding and will potentially waive your rights to contest the allegations at a later date.

Should I defend the lawsuit or file bankruptcy?

It depends on the particular facts of the case and your personal financial condition. Every case is unique. That being said; many people believe that the only way to deal with a legal action such as a lawsuit or foreclosure is to file bankruptcy. Bankruptcy may be a good choice for some people but not others. There are bankruptcy alternatives to address debt related lawsuits which include defending the lawsuit. Since there are numerous frivolous lawsuits and just a many wrongful foreclosure proceedings, these alternatives may be options to pursue when facing a lawsuit. Lawsuits and foreclosures can be easily defended if they are not filed properly.

Most people don’t contest or defend lawsuits or even pursue their rights regarding wrongful foreclosures, frivolous lawsuits, or other situations where they would likely prevail. What works for one person may not work for another. In order to determine whether to defend a lawsuit or file for bankruptcy relief, you should seek the advice of an experienced bankruptcy lawyer like Texas Bankruptcy Attorney R.J.Atkinson.

If You Have Received a Lawsuit Know Your Options.

If you have been sued, you may have bankruptcy options under Chapter 7 Bankruptcy or Chapter 13 Bankruptcy to stop the lawsuit and receive a discharge in bankruptcy. Many people who are served with a lawsuit never respond or wait until the day before the response is due to seek legal advice. Knowing when to consult a lawyer is extremely important when you have been sued.

If you live in Texas and have been sued, don’t wait to the last moment to seek legal counsel. Whether you are considering bankruptcy or defending the suit, you have options to address the lawsuit. Since there are many types of lawsuits ranging from foreclosure actions to paternity suits, from debt collection to personal injury suits, it only makes sense to seek competent legal counsel and weigh all the possibilities and consequences when faced with a particular legal situation.

If you have been served a lawsuit by the County Constable, or via a professional process server, contact The Law Offices Of R.J.Atkinson for a free initial consultation to see what options you may have to deal with the lawsuit. It is important to get legal advice as soon as you are served as you must respond to the lawsuit within the statutory time to do so or a default judgment may be entered against you.

Have You Been Sued? Questions about Lawsuits? Questions about Bankruptcy?

Contact Texas Bankruptcy Attorney R.J.Atkinson: 800-436-9056

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