After unsuccessfully attempting to collect a debt through phone calls and correspondence, an Alabama creditor may file a lawsuit against you. When a creditor sues you, you must raise any defenses or claims in response by setting forth affirmative defenses or filing a counterclaim. Some debtors respond to lawsuits by considering the bankruptcy process, but you should consult an experienced Montgomery attorney before making this choice. At the Grainger Law Firm, we can help you decide on the right financial path for your specific situation if you are facing legal action from one or more of your creditors.Creditor Lawsuits and Automatic Stays
Bankruptcy can be an appropriate action to take if you are facing multiple collection efforts and creditor lawsuits. Filing for bankruptcy may discharge most of your debts, including lawsuit judgments. However, whether your bankruptcy will actually discharge an existing lawsuit judgment depends on the type of injury or debt the judgment concerns, and whether a creditor has obtained a judgment and placed a lien on your property. If the lawsuit judgment is for a non-dischargeable debt (such as a student loan or a vehicle accident while intoxicated), you will not be able to get rid of it with bankruptcy.
If you file Chapter 13 bankruptcy, you will need to commit to repaying at least a portion of your debts over a period of 3-5 years. As long as you commit to making repayments in accord with the plan, and you do make all payments, Chapter 13 bankruptcy will prevent a creditor from bringing or continuing a lawsuit against you.
When you file for either Chapter 7 or Chapter 13 bankruptcy, an automatic stay prevents all kinds of collection activities, including lawsuits, garnishment, and harassment. However, an automatic stay will not stop a criminal case from being filed against you, and it may not stop certain child support and eviction lawsuits. The automatic stay does stop collection actions for consumer debts, such as medical or credit card debt. You should be aware that the automatic stay will not apply to any debts you incur after bankruptcy is filed or any debts you fail to include in your bankruptcy paperwork.
If a collector files a lawsuit or continues a lawsuit after you have filed bankruptcy, that attempt is a violation of the automatic stay. You can tell the creditor about the bankruptcy, and usually this will result in the collector correcting its violation. Often, the collector will be unaware that you have filed bankruptcy and will file the necessary paperwork to stop the lawsuit.
When a collector does not stop a lawsuit upon being notified, you will need to notify your attorney. A willful collection lawsuit in violation of an automatic stay can result in sanctions against the collector. A collection lawsuit is willful when an automatic stay is in force, the collector knew of it and failed to stop the suit after learning of the bankruptcy, and the collector acted with intent to continue the suit. The court may sanction a creditor that continues a collection lawsuit in violation of the automatic stay.
After these efforts have been made, you can file a lawsuit against the collector under the Fair Credit Reporting Act, the federal Fair Debt Collection Practices Act, and your state's fair debt collection practices and unfair trade practice laws. You may be able to collect penalties and damages.Consult A Bankruptcy Attorney in Alabama
If you are anxious about pending creditors' lawsuits, you may find it helpful to consult a bankruptcy lawyer who has helped numerous individuals throughout Alabama. At Grainger Legal Services, we have years of experience evaluating the financial situation of our clients and guiding them through the complicated process of filing for bankruptcy. We serve individuals in Montgomery, Prattville, and Troy, as well as surrounding communities. Call us at (334) 260-0500 or contact us online to schedule a consultation.