Bankruptcy can be a powerful tool to stop lawsuits. Our home office is in Kansas, so we will approach things from that perspective in this document. A lawsuit is a method used mostly by creditors to try and collect debts. It requires them to file a petition in the state court (sometimes the federal court) to try and get a judgement against you. Once they have the judgement they can use it to collect the money you owe.
You will normally receive a letter or notice from the attorney or collections company on the debt you owe before the lawsuit is filed. That letter will give you a limited amount of time to let them know whether or not you contest the debt that is owed. This is also how they contact you to see if payment arrangements are possible.
After 30 days from receipt of the original letter the attorney’s office can file a lawsuit. The lawsuit is filed with the courthouse and assigned to Judge. It then has to be served upon you. Most people think that getting served with a lawsuit requires someone to hand deliver the paperwork to you (like in the movies), but that does not always happen. In many cases the lawsuit is served on your last known residence and in some cases by mail. Many of our clients tell us they never saw the lawsuit but only found out about it when they were garnished.
Most collections lawsuits in Kansas are done in the Limited Actions court. This is also called a Chapter 61 procedure. It is a streamlined process and often used for credit card, personal loans, and medical debts.
A few lawsuits are filed in Chapter 60. These are cases where there is real estate or large sums of money involved. Foreclosures are filed under Chapter 60. The procedures to run a case through Chapter 60 are more detailed and more expensive than in Chapter 61.
In either case if you do not litigate the lawsuit, or if you litigate and lose, a judgement will be entered against you for the amount determined by the court. The attorney for the creditor can then use the judgement to garnish your wages, garnish money in bank accounts, or seize other property that is not protected by law.
A creditor can also use the judgement to force you to come to court to answer their questions and give them information about you (such as where you work, where your bank accounts are and what property you own). If you are ordered to appear in court to answer questions on a collections lawsuit it is known as a Hearing in Aid of Execution. If you fail to appear at the hearing a creditor can request that you be held in contempt and a bench warrant issued for your arrest. Although there are no debtors prisons in the United States you can be picked up by the police or sheriff for failure to appear because it is a violation of a court order.
A bankruptcy will stop the lawsuit, any garnishments, and any attempts to use the judgement to collect against you. Most judgments from lawsuits for debt collection can be wiped out in a bankruptcy case. You can contact our office and one of our bankruptcy attorneys will sit down with you and explain how the bankruptcy will affect you and and what steps you need to take to get a case on file.
We have filed thousands of bankruptcy cases. We have stopped thousands of collections lawsuits and lifted hundreds if not thousands of garnishments. We can help you take control of things and get back on track. There is a bankruptcy attorney willing and able to go over your options with you at Coons and Crump. Please contact us today.