Court Cases And Bankruptcy: How They Affect Each Other
by Veeti Lepisto
The old saying that when it rains it pours can often apply to financial and legal matters. When those two worlds collide, it can be confusing and stressful. If your financial situation has eroded and you are considering filing Chapter 7 bankruptcy, certain legal matters can be affected. These matters are serious and need to be discussed with a bankruptcy lawyer, but read below for an idea of what might happen with court cases during bankruptcy.
When Creditors Sue
If you cannot pay your bills, you can be taken to court. You can be sued by medical facilities, credit card issuers, and more. Without bankruptcy to stop them, creditors almost always prevail in court and few debtors appear to defend themselves. If you don't take action soon enough, however, the court judgment can make life even more difficult for those behind on bills. The court has the power to place liens on your home and garnish your income wages. That means you cannot sell your home or use it to get a home equity line of credit. It also makes your take-home pay even less than it may already be.
How a Bankruptcy Filing Helps
If you have already been sued and there are punitive actions in place, filing Chapter 7 bankruptcy will impose an automatic stay immediately. That means no debt collection activities can continue, wage garnishments are stopped, and liens are removed from your property. If you owe money to anyone, that goes away with bankruptcy even if you have been ordered to pay with a court judgment. You can avoid all of those hassles if you file bankruptcy before they take you to court.
Other Court Cases
Some types of court cases can only be affected on a short-term basis or not at all. For example, if you are involved in a personal injury case as the defendant, the automatic stay may only temporarily stop the proceedings. When it comes to criminal cases, the fact that you have filed Chapter 7 bankruptcy will have no effect on things whatsoever. The same applies to divorce cases, though you would do well to talk with your bankruptcy lawyer about divorce before you file. Since both bankruptcy and divorce involve matters like debt, income, and property, it might be advantageous to file for one before you file for the other. Finally, if you have the potential to win money through a personal injury or other court cases, it might be best to wait until after your bankruptcy case is final to pursue things. In some cases, court winnings could be subject to seizure under bankruptcy rules.
Speak to your bankruptcy lawyer to learn more about Chapter 7 bankruptcy law.
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About Me
Several years ago, one of my best friends married the guy of her dreams. This tall, quiet man adored my friend. Almost every week during their courtship, he presented her with a beautiful, fragrant arrangement of flowers. At the time, my friend’s mom joked that her home resembled a funeral home because of all of the flowers her boyfriend sent her. After the happy pair married, they purchased a new home together and quickly began running out of money, meaning that he could no longer afford to give her the flowers she loved. They even discovered they couldn’t afford to pay the monthly mortgage. After only a few years of marriage, they filed for bankruptcy. On this blog, you will discover the ways a reputable bankruptcy attorney can help you successfully recover from financial ruin.