I Am Being Sued After Filing for Bankruptcy
Being sued after filing for bankruptcy can compound an already stressful financial situation. Bankruptcy law provides protection from creditors and collection practices during your bankruptcy as long as you follow regulations and filing instructions. Using bankruptcy for the wrong reasons or attempting to hide financial facts from the court may allow creditors to renew collection practices against you.
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Bankruptcy Protection
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Filing for bankruptcy grants you a temporary order for relief, also known as the automatic stay, while your bankruptcy is in process. This legally bars any of your creditors from pursuing collection practices against you, including lawsuits. If any creditor attempts to file a lawsuit against you while you under protection of the automatic stay, it's important you contact the court as soon as possible. Once the court is informed of the lawsuit, it can be blocked and the creditor is required to wait until your bankruptcy is finalized to renew collection practices if the debt still exists.
Mortgage Debts
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If you are a few months behind on your mortgage payments and your mortgage lender files for foreclosure proceedings before the court receives your bankruptcy paperwork, an automatic stay cannot protect you. You may not receive official notice of the foreclosure lawsuit until after you file for bankruptcy. This may mean your mortgage company may seize your home even as you're going through the bankruptcy process.
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Relief for Property
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A creditor may also appeal to the bankruptcy court for relief from the automatic stay. Relief may be granted if the creditor can show protection under the order offers no benefit to the debtor. For example, a mortgage lender may be granted relief from the automatic stay if they can show the debtor has no equity available in the property and would therefore not benefit from bankruptcy reorganization. Termination of the automatic stay does not validate any previous legal actions taken by the creditor but does allow the creditor to file new legal proceedings against the debtor.
Relief for Cause
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A creditor may file for relief for cause from the bankruptcy automatic stay if the creditor can show a debtor has not been diligent in following bankruptcy regulations, making timely payments in accordance with a bankruptcy plan or is merely using bankruptcy as a means of delaying payment to the creditor. The court may grant the creditor termination of the stay, annulment, modification or conditioning. Annulment of the automatic stay restores any previous lawsuits filed by the creditor as if the relief order never existed. Modification and conditioning of the automatic stay allows the creditor to continue with specific collection practices that may involve suing the debtor to obtain a judgment against him.
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