A Creditor Is Suing Me. What Should I Do?
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When you file your bankruptcy paperwork, you will need to mention any lawsuits creditors have brought against you.
Written by Kristin Turner, Harvard Law Grad.
Updated August 27, 2021
If you've fallen behind on making payments, such as on your credit card debt, and your original creditor or a debt collector sues you, this can impact your bankruptcy case. If you're dealing with a debt collection lawsuit for an unpaid debt when you start a bankruptcy filing, you'll need to mention the debt collection lawsuit in your bankruptcy paperwork.
Once you've filed your bankruptcy paperwork, the court will notify your creditors and any collection agencies trying to collect debts. At this point, the court will issue an automatic stay, which means creditors are required by law to stop calling you. If a debt collector reaches out to you after you have filed, you can give them your bankruptcy case number and politely ask them to stop calling you. This is within your legal rights.
Dealing With a Debt Collection Lawsuit While Dealing With Bankruptcy
What happens next will depend on how the court dates of the debt collection lawsuit against you line up with your bankruptcy hearing dates. If the court dates for the debt collection lawsuit come before your bankruptcy 341 trustee meeting, you will need to attend those court dates and tell the judge you've filed bankruptcy. The judge will then either dismiss the creditor's lawsuit against you or wait to deliver a judgment until your bankruptcy case has concluded.
If you do not show up to these hearings, the judge could file a default judgment against you and may even give the creditor a court order for wage garnishment or an order that allows them to levy your bank account.
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Creditors and Your 341 Meeting
The bankruptcy process has many steps. One part of the process is the 341 meeting with a trustee assigned to oversee your case. This meeting allows creditors to challenge your bankruptcy. If a creditor is suing you, they can attend the meeting to ask you questions about your filing. If they choose to attend the meeting, they are not there to prevent you from getting debt relief. They just want to find out if you have any property they might be able to take to repay your debt. But rest assured, they are not allowed to take anything that is protected by state or federal bankruptcy exemptions.
After your 341 meeting, the bankruptcy judge will issue a final ruling either approving or rejecting your petition. If approved, you will need to notify the judge in the debt collection case who will most likely dismiss the creditor's lawsuit. If your bankruptcy petition is rejected, you must comply with whatever ruling the judge issues in creditor's lawsuit against you.
In either case, you may want to get legal advice from an experienced bankruptcy attorney. If you're filing Chapter 7 bankruptcy using Upsolve's free online tool, we'll ask questions to ensure that we compile all information regarding current lawsuits against you.
Let's Summarize...
If a creditor is suing you and you're filing for bankruptcy, it's important to note the creditor's lawsuit on your bankruptcy paperwork. It's also important to show up to any court hearings for the creditor's lawsuit until the judge in your bankruptcy case rules on your petition. As part of the bankruptcy process, you'll have a 341 meeting. Creditors are allowed to attend this meeting to challenge your case. But they don't usually want to stop you from getting debt relief, they just want to see if you have any assets that can be used to repay your debt.
