Your creditor may file a lawsuit against you to collect the outstanding balance you owe them. If the court decides in their favor, a judgment may be entered for you to pay them back a certain dollar amount. This may be done through garnishing your wages, placing levies on your bank accounts, placing liens on your property, and other collection tactics. Any of these actions may just make your financial standing even worse than it already is. And so, in a last-ditch effort to save yourself, you may consider declaring bankruptcy. With that being said, please continue reading to learn whether a bankruptcy filing can protect you from lawsuit judgments and how an experienced Louisville, Kentucky consumer bankruptcy lawyer at Schwartz Bankruptcy Law Center can help shield you in your vulnerable financial state.
Can a bankruptcy’s automatic stay protect me from lawsuit judgments?
Once you file your bankruptcy paperwork, the Kentucky bankruptcy court may order an automatic stay. This legal junction immediately suspends most collection efforts by creditors against a debtor. Notably, lawsuit judgments are included in these paused collection efforts.
Are there exceptions to this bankruptcy protection?
Importantly, you must note that your bankruptcy case may only protect against lawsuit judgments on your dischargable debts and not your non-dischargable debts. As the names suggest, the former are debts eliminated at your case’s close, while the latter will remain part of your legal responsibility to pay off. More specific examples of these debt types read as follows:
- Dischargeable debts potentially barred from lawsuit judgments:
- Credit card debt.
- Medical bills.
- Certain tax debts.
- Delinquent utility bills.
- Non-dischargeable debts not shielded from lawsuit judgments:
- Outstanding spousal and child support payments.
- Student loans, unless you claim an undue hardship.
- Debts incurred due to criminal fines or restitution.
- Debts resulting from willful and malicious injury (i.e., a drunk-driving accident).
With that being said, though, not all dischargeable debts are automatically granted immunity from lawsuit judgments. Specifically, this does not apply to dischargeable debts in which a creditor can and has placed a lien on your property, such as your house or vehicle. For this, you may have to take an extra step and file a lien avoidance action with the Kentucky bankruptcy court.
Here, you must claim bankruptcy exemptions that partially or entirely protect your property’s equity. Notably, federal bankruptcy exemptions allow you to exempt up to $27,900 in equity for your primary residence. Then, you can save up to $5,025 in equity for your vehicle. Otherwise, your creditor may still exercise their right to foreclose on your house or repossess your vehicle post-bankruptcy.
To ensure you do not go through this critical yet complex process alone, please reach out to a skilled Louisville, Kentucky consumer bankruptcy lawyer. Our team at Schwartz Bankruptcy Law Center is more than happy to serve you.
