A lawsuit is a dispute filed by one party against another party where they are looking for independent adjudication from the Court of Law. In the Civil context, one party can sue another party for money that is owed. For example, a credit card company that isn’t receiving their payments, a medical bill that has gone unpaid, or even a car that was repossessed for lack of payments. In order to do this, the creditor would file a Summons and Complaint with the State Court. The Summons and Complaint lays out the creditor’s allegations against the other party. In short, they would be explaining to the Judge how much money is owed, how much is delinquent, their attempts to collect on that debt, and their prayer, which is what they are asking for.
Once the lawsuit is filed, the creditor has to serve a copy of the Summons and Complaint to the individual being sued. Upon the service, the individual then is given 30 days to file their Answer, which is their response to the Summons and Complaint. If no Answer is filed, which is common, the Creditor then can request a Default Judgment, meaning they win the case without having to prove anything else. Then the Creditor has Judgement in-hand and likely will go one of three routes to attempt to collect their money: Wage Garnishment, Bank Levy, or putting a Lien on their house.
All of this sounds scary. However, if at any point the individual has filed for Bankruptcy relief, the lawsuit must cease pursuant to the Automatic Stay. Our team is well versed in dealing with these lawsuits and getting a Bankruptcy initiated quickly and efficiently.
Exemptions
Having a deep understanding of Exemptions within the Bankruptcy context is a crucial piece of the puzzle that can make or break a bankruptcy case. As we discussed earlier, when a person files for Bankruptcy relief, the individual’s assets must be disclosed. In the Chapter 7 case, any assets that are “non-exempt”, the Trustee will take those assets, liquidate them, and give that money to the creditors. In the Chapter 13 case, any assets that are “non-exempt” are not liquidated but the amount of the payment plan would increase depending on how much is “non-exempt”.
Filing for Bankruptcy without a full understanding of the Exemptions is risky and should never be done, especially in a Chapter 7 case. Once the case is filed, the estate is open and if assets are “non-exempt”, the individual can’t just exit out of the case. The Court will move it forward and liquidate the assets if they are “non-exempt”. In most cases, our dedicated team uses the Exemptions and exempts all of a person’s assets, meaning that none of the individual’s assets are liquidated. Allow our team to use our knowledge to help you save your assets.
