What can a debtor do in the event of a credit card company filing a lawsuit against them? Well, it would be in the best interest of the debtor to take immediate action and file for bankruptcy to stop that lawsuit. The reason is that if the credit card company succeeds in filing a lawsuit against them, the property of the debtor can be put on a lien, making it difficult for them to sell or transfer their asset. Eventually, a lawsuit can cause significant damage to their credit rating. In that case, it gets tougher for them to secure new credit.
Should the debtor fight the lawsuit
Well, unless it is a case of identity theft and someone else has breached the debtor’s identification, it does not make sense to fight the lawsuit. Such a step will only add to the debt since the legal consultation fee and collection cost will be added to the total debt amount by the court.
A debtor may negotiate with credit card companies and pay a part of the debt in order to stop the lawsuit. In that case, the debtor must take such steps before the credit card company files the lawsuit.
The best step to prevent a credit card lawsuit is by filing for bankruptcy. In the event a debtor files for bankruptcy, creditors must stop all collection efforts against the debtor as the court puts an automatic stay. Creditors cannot resume such lawsuits unless the bankruptcy stay is lifted.
Credit Card Lawsuits and Bankruptcy
In many cases, all of the debt is discharged completely when a debtor files for bankruptcy. Typically, the bankruptcy code will decide the future of the lawsuit and debt against the debtor. Under Chapter 7 of bankruptcy law, all of the debtor’s assets are sold. The creditors get a share of the proceeds. Credit cards are the lowest priority debits, being unsecured debts, so credit card creditors will be the last to get a share from the debtor’s proceeds.
After higher priority debts are paid, the remaining money may be distributed among the credit card companies. As a result, the credit card company can no longer take any action against the debtor. Any such lawsuits must be dropped immediately.
Under Chapter 13, the debtor must enter into a repayment plan and make payment to the bankruptcy trustee for distribution among creditors. While higher-priority debts are paid first, credit card debt is considered a low priority and gets paid last if any money is at all left.
After the completion of the repayment plan, any remaining credit card debt is discharged completely. The failure of the debtor to complete the repayment plan would give the credit card company the right to resume the lawsuit as the automatic stay will be lifted. What’s more, they can resume their collection efforts too.
Exceptions to Bankruptcy Protection for Debtors Against Credit Card Lawsuits
Does bankruptcy protect a debtor against credit card debts all the time? Well, there is an exception to the rule. A creditor may not be eligible for bankruptcy protection if the debtor proves that theirs was a fraudulent act of debt. In that case, the court will deny the bankruptcy application while lifting the automatic stay. As a result, the debtor must repay the loan to the credit card company.
How Can A Bankruptcy Attorney Help
If a debtor is threatened to be dragged to the court by a credit card company or creditor, they can seek legal counsel from an experienced bankruptcy attorney to guide them through the legal proceedings and prevent a judgment against them. The top bankruptcy and debt solutions lawyer can help the debtor find the best option to stop the credit card lawsuit against them. Get in touch with the top attorney today.