Protecting Yourself When Sued: Bankruptcy Strategies

Welcome to Bankruptcy.Blog. This blog post and accompanying YouTube video focus on the steps you should consider if you are sued by a creditor, even if you plan to file for bankruptcy. Learn the additional steps you may have to take once you file the bankruptcy petition.

Filing a Response to a Lawsuit

Filing for bankruptcy can stop most lawsuits, but timing is crucial; however, the filing of the bankruptcy petition isn’t always enough. If bankruptcy isn’t going to be filed immediately, there are steps you should take to protect yourself.

The first step to consider is filing a response to the lawsuit. If a response is not filed, the court will grant a “default,” and the requests made in the petition will be granted. I always use the following exaggerated example for clients on the importance of filing a response.

• Are You Judgment-Proof?

Suppose you were served a divorce petition. In that divorce petition, your spouse requests that you buy a Ferrari and make payments on the car loan on behalf of your spouse.

Now, it’s clear you cannot afford a Ferrari, but that exaggerated and outlandish claim was still listed in the divorce petition. However, failing to respond to that allegation or request would mean that the court would grant your spouse the Ferrari.

Then, your spouse would file a motion for contempt against you for not complying with that court order. Does that sound insane? Absolutely! But that’s why a response should be made to the petition or complaint.

However, filing a response means the next step is the discovery process (exchange of documents). During this time, there could be pretrial conferences or mediation to reach an agreement. This helps buy time until the bankruptcy is filed.

Steps to Take After the Bankruptcy Petition Has Been Filed

When bankruptcy is filed, the automatic stay in bankruptcy protects against most lawsuits from moving forward (excluding criminal, child support, and alimony). But the automatic stay is not enough. A “suggestion of bankruptcy” should be filed in the civil case to notify all parties formally. This should be done before a foreclosure sale, as it will stop the foreclosure automatically.

• Understanding the Automatic Stay in Bankruptcy

The Suggestion of Bankruptcy can be obtained directly from the bankruptcy clerk or PACER (Public Access to Court Electronic Records) when the petition is filed.

I hope you enjoy my YouTube video, which further explains this post. Feel free to subscribe, like, and comment on the video.

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. For paralegals and students buying single copies, you can do so via Amazon Books. To access my YouTube channel, click this link.

Need to look for prior blog posts or other categories? Click the links below:

• Bankruptcy
• Your Wallet