Imagine having job security, being able to pay your bills, and life being just fine. Then, you lose your job and you can’t keep up with your bills and all of the sudden you’re sued for not paying your credit card or a creditor bringing you to court for breaching your contract to them. This happens all the time.
Now, let’s say you’re in the middle of a civil lawsuit and you decide you can’t deal with it anymore and want to file a chapter 7 or chapter 13 bankruptcy. When a defendant or debtor decides that bankruptcy is the only way out, it stops the current civil matter or at least temporarily stops it. This occurs because the bankruptcy code allows what’s known as the automatic stay, which stops creditors from moving forward in any case. There are exceptions to this rule – if you’re a defendant in a criminal matter or dealing with child support in family court.
For the most part your civil lawsuit will stop if your case involves home foreclosures, credit cards balances, damages from a breach of contract, and other debts that would normally be discharged in a bankruptcy. However, a creditor may ask the bankruptcy court to allow your civil lawsuit to move forward or they may file an adversary claim against you, the debtor, in bankruptcy court.
An adversary claim would basically bring the civil lawsuit into the bankruptcy court and a creditor will ask the court to prohibit that debt from being discharged in a bankruptcy. Although there are numerous reasons why a creditor would bring a claim forward, Section 523(a)(2)(A) of the Bankruptcy Code allows a creditor to bring a claim if the debt was gained by “false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition.”
If an adversary claim is brought in your bankruptcy case, you may retain the attorney who filed your original bankruptcy case, or seek an attorney who specializes in bankruptcy litigation. In any event, do not ignore an adversary claim and you should take action if one is brought forward.
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So, if you’re thinking of filing for bankruptcy, and or if you have questions or are ready to get your life back, reach out to Minnesota’s nicest bankruptcy law firm by going to www.lifebacklaw.com. You won’t regret it!