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Does Filing Bankruptcy Stop Credit Card Lawsuits?

  • By: Christopher Benson
  • Published: October 10, 2014

Credit card debt is unsecured debt. That means there is no lien connected between the money you borrowed and what you purchased. An example of a “secured” debt is when you take out a loan for a car or home.

Because the credit card company does not have a lien on what you purchased (or the ability to repossess what you purchased), what’s a creditor to do? They sue you for the full amount due and owing.

A lawsuit from a credit card company will come to your attention in the form of a summons and a complaint. The summons notifies you that you have to prepare a legal response within a specified period of time in order to avoid the Court automatically entering a judgment against you. That is your opportunity to defend yourself. If you don’t, you’ll likely end up with a judgment against you, which is exactly what the credit card company wanted.

A judgment means that the credit card company has legal rights that they can enforce against you such as garnish the funds in your bank account, garnish 25% of your gross wages from each paycheck and record a lien against your house.

When you file for Chapter 7 or Chapter bankruptcy, first the automatic stay puts a hold on this process. Then, as you list all your debts, you can include this debt, this judgment against you. If your debt is discharged, the judgment is discharged also.

***However, if you own real estate and you want to keep your house, you will also have to file a Motion in Bankruptcy Court to remove the judgment lien against your house. The judgment lien does not automatically go away.****

Over the past 27 years, the Law Offices of Christopher A. Benson has helped over 2,300 of Washington clients take control of their financial situation. We can stop your garnishment and change your monthly payments for all your combined unsecured debt, and if you have had more than $600 garnished within the last 90 days, we can get all of the money back in most cases. But you have to act quickly–call (253) 815-6940 for your free consultation, or email us today. Evening and weekend appointments available.

Christopher Benson

About the Author Chris served on the Board of Directors for Habitat for Humanity
Seattle/S. King County for 10 years and served as Vice President
of the organization during part of that time. Read More