Can You Be Sued During Bankruptcy Proceedings?

Filing for bankruptcy is a fairly straightforward process, but that does not mean that you will not feel stressed throughout the proceedings. The last thing you need is for someone to file a lawsuit against you. In fact, many borrowers file bankruptcy in order to prevent being sued by creditors. While filing bankruptcy will prevent many creditors from suing you, and even contacting you, it may not protect you from all types of lawsuits. Below, our Orlando bankruptcy lawyer explains more.

Adversary Proceedings

If an adversary proceeding is part of your bankruptcy case, it usually means that a creditor is arguing about the discharge of the debt. The creditor, known as the Plaintiff, will argue that the debt you owe them should not be discharged because it does not qualify for discharge, or because you incurred the debt fraudulently.

For example, if you made a large purchase just before filing, assuming the debt would be discharged and you would not have to pay it, that can be considered bankruptcy fraud. The creditor may initiate an adversary proceeding to argue their case and regain the right to pursue legal action, such as a lawsuit, against you.

Lawsuits that Do Not Involve Debt

Consumer debt lawsuits are just one type of legal action a person could face. For example, if you do not pay child support while going through bankruptcy proceedings, the recipient can still file a lawsuit over the unpaid funds. Additionally, if you are involved in a criminal case, filing bankruptcy will not stop these legal proceedings.

Being Sued After an Automatic Stay is Issued

Immediately after you file bankruptcy, regardless of what type you file, the bankruptcy judge will issue an automatic stay. The automatic stay prevents creditors and debt collection companies from trying to collect on the debt you owe. If a creditor does not know about the automatic stay, they may still try to file a lawsuit against you in a court other than the bankruptcy court. If a creditor does not know about the ongoing bankruptcy case, you should notify the bankruptcy judge about the debt collection attempt. This will likely stop all legal action against you, as well as future debt collection attempts.

What to Do if You are Sued During Bankruptcy

It is easy to panic if a lawsuit is filed against you during bankruptcy, but there is no need to. Just because someone files a lawsuit against you does not automatically mean they will win their case. Still, you must follow proper court procedure.

After receiving notification of the lawsuit, you are required to respond by filing a Motion to Dismiss or an Answer. Both are very common, but they can seem complex for those who are not familiar with them. To ensure you respond properly, and that you overcome any challenge during the process, it is critical to speak to an Orlando bankruptcy lawyer.

Call Our Bankruptcy Lawyer in Orlando Today

If you are considering filing bankruptcy, do not take any action until you have spoken to an Orlando bankruptcy lawyer. At Anderson & Ferrin, P.A., our seasoned attorneys can help you navigate the process so you have the best chance of a successful outcome. Call us now at 407-412-7041 or contact us online to schedule a free consultation.

Sources:

flsb.uscourts.gov/adversary-proceeding

law.cornell.edu/uscode/text/11/chapter-7