After you submit the bankruptcy petition the court will initiate an automatic stay which will stop creditors from continuing their debt collection efforts, this includes ongoing credit card lawsuits. The lawsuit, however, may be continued under some conditions after the bankruptcy is completed, if it is dismissed or if the court decides to lift the stay. So what will happen to the underlying credit card debts if you file bankruptcy? It will depend on whether you file Chapter 13 or Chapter 7 bankruptcy.
Chapter 7 bankruptcy and lawsuits
If you have filed Chapter 7 bankruptcy most unsecured debts will be discharged within 4 to 6 months from the date you filed the bankruptcy petition. As mentioned above, the automatic stay will stop credit card lawsuits. Assuming the credit card debts are discharged in your bankruptcy, the lawsuit will also be dismissed.
While you can generally discharge credit card debts through Chapter 7 bankruptcy, there are times when the creditor will object to the discharge. For instance, if you make charges after you have decided to file bankruptcy, if you make purchases for luxury goods within 90 days of the bankruptcy filing and the aggregate purchases are more than $650, or if you withdraw cash advances which are more than $925 and within 70 days of your bankruptcy filing the credit card company can object to the discharge by filing an nondischargeability complaint.
If the court agrees you have performed these actions they will deny the dischargeability of the credit card debts and the lawsuits to collect the debts can be restarted following the completion of your Chapter 7 bankruptcy.
Chapter 13 Bankruptcy and lawsuits
Under Chapter 13 bankruptcy you will be required to create a bankruptcy repayment plan and repay a portion of your debts over a 3 or 5 year repayment period. Like Chapter 7 bankruptcy, when you submit your bankruptcy petition the court will initiate an automatic stay and the creditor will be barred from initiating or completing the lawsuit.
Assuming you complete the repayment plan and the unsecured debts are either repaid or the portion which is not paid is discharged, the creditor will not be able to initiate or resume the lawsuit. If, however, you fail to complete the repayment plan and you have not repaid the debt, the automatic stay will end and the creditor can initiate the lawsuit again.
Judgment following a lawsuit
What happens if the lawsuit has been completed and the court has issued a judgment against you? Filing Chapter 7 bankruptcy may discharge the judgment against you but it will depend on whether the debts are considered dischargeable.
For instance, there are some debts which are not discharged in bankruptcy, including most student loans, child and spousal support payments, debts owed a government entity, post petition HOA fees, and criminal fines assessed after a DUI conviction.
If the judgment is a result of a nondischargeable debt it may remain after completing bankruptcy. Additionally, some judgments will remain if a creditor files an objection to your discharge and proves the underlying debt is the result of a willful or malicious act or due to fraud.
Latest posts by Beth (see all)
- Chapter 7 bankruptcy how to avoid filing a second time? - April 24, 2017
- Chapter 7 bankruptcy how do they determine if I can file? - April 19, 2017
- Receiving Supplemental Security Income can I file for bankruptcy? - April 12, 2017