Credit Card Lawsuits and Judgments

Getting served a Summons and Complaint can be shocking for most people.  It usually threatens the Defendant with suing for a certain amount on a credit card.  If the Defendant doesn’t show up on the court date, the court will enter a default judgment if the Plaintiff’s attorney appears.  Filing for bankruptcy may be a good idea if you have a pile of lawsuits laying around.  If you earn an income, these Plaintiff creditors may try to garnish your wages or even levy bank accounts after receiving a default judgment.  Filing for bankruptcy prevents credit card creditors and their assignees from further attempting to collect on the debt, even if the lawsuit has been already filed.  This “automatic stay” is a powerful weapon when filing for bankruptcy and when the credit card debts and lawsuits are discharged, the debtor start fresh.

Automatic Stay

An automatic stay prevents creditors from taking any collection action against you.  This includes phone calls, filing lawsuites, pre-foreclosure activities, monetary collections, garnishments and freezing bank accounts.  An automatic stay is one of the most powerful tools in a bankruptcy filing because it allows debtors some immediate breathing room.  If a filer’s wages are being garnished, the bankruptcy court immediately notifies the employer, and the garnishments must stop.  All collection calls must also stop.  That’s the good news.

The issue is when there is secured property (such as a home or car).  Because physical property has been secured by a mortgage or auto loan, the creditor in these situations can file a motion seeking relief from the stay.  Some do, some don’t.  If the secured creditor does file the motion, the bankruptcy court will almost always grant it, thereby allowing the secured creditor continue their collection activities.