Will Bankruptcy Help Me If I am Sued by A Credit Card Company?

Credit card lawsuitIf you get sued by a credit card company or other debt collector you should consult with a bankruptcy attorney to learn about what options may be available to you. A bankruptcy lawyer can tell you if and how the debt that you are being sued for can be discharged through bankruptcy. You should make an appointment soon after receiving garnishment papers as waiting until after a default judgment is entered against you is not a good idea.

Once you file for protection under the Bankruptcy Code through either a chapter 7 or chapter 13 bankruptcy, something called the automatic stay prohibits any creditors from taking action against you or your assets. If you have been sued, this means that the creditor cannot pursue the matter any further and the debt will be discharged. So, if you have been sued but a judgment has not yet been entered, that creditor is treated just like any other unsecured creditor so long as the debt that you are being sued for is related to an unsecured debt such as credit cards or medical bills.

If you waited until after a judgment has been entered against you, things become more complicated. First of all, a judgment lien attaches to any real estate that you may own in the county in which the judgment was entered and in the county to which the judgment is recorded. If you own real estate, the debt may have gone from an unsecured debt to a secured debt through a judgment lien.

It is possible for a judgment lien to be avoided as they “impair” a debtor’s allowed exemptions. This means that if you do not have any more equity in your house than you can exempt, you can “avoid” the judgment lien. But, if you have more equity in your home than you can exempt, the judgment lien may stay in place. A fundamental principle of bankruptcy law is that a lien survives the bankruptcy unless it can avoided under the Bankruptcy Code or other applicable law.

If you have additional questions please contact Symmes Law Group at 206-682-7975 to schedule your free consultation.

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