Stopping lawsuits is a major reason for filing bankruptcy. While bankruptcy is not the only way to resolve a lawsuit, it can be a very powerful solution that many defendants seek when they are facing a lawsuit. There are many reasons that a person could be sued, which is often a new thing because most people are not going around attracting lawsuits at every turn. It is quite common for a prospective client to call and say that they have never done this before, nor have they ever been sued and so it is very disconcerting to them and they are seeking for relief from very stressful thoughts that are overwhelming them.
There are many reasons a person could be sued, such as:
- Maybe you were late on a credit card, then went into default and finally did not pay any more at all and the card account was charged off and sold to a collection law firm who specializes in suing debtors to get money for the original creditor.
- Maybe you were late on a car payment because you lost your job or had serious medical problems and then you were unable to keep up with the payments and became further and further behind until they repossessed the car. Once they repossess the vehicle, they sell it at auction, typically at a severely reduced price based on the fact that the buyers are paying cash for these vehicles. Next, because they sell it for less than what is owed, they come after you for this amount known as the deficiency balance. Because you were unable to pay for the car in the first place or because you are without a car and hence without a job, it is unlikely that you would be able to pay for this deficiency balance. Additionally, you will need to get another car at some point and be unable to likely make two car payments, one for the car you have and one for the car you don’t have any more. For this reason the original creditor or a debt buyer who purchases the debt will sue you in a lawsuit to come after you for this debt.
- Maybe you had to break a lease because you had to move for work and were unable to complete the entire term of your lease. You may have faced the prospects of paying a large early termination fee or pay the down payment on your new lease in a new location where you need to move in order to keep employment. If you are faced with the prospects of both options, you would likely choose to pay the down payment on the new lease out of necessity. Then you brush aside the old lease and think to yourself that you will deal with it later. The time comes and passes for you to pay them and the debt gets older and older and you get to the point where you forget about it except on certain days where it lingers in the back of your mind as an old and festering problem. But if you are not out getting a new apartment or rental house on a regular basis, then you don’t have much of a push to get that old broken lease paid off. This is the point where the lawsuit comes into play because the older landlord may tire of waiting for you to pay or may dispute the amount owed and you think you owe less and they say you owe more and it is a fight. But eventually if they choose to sue or sell the debt to another company who decides to sue within the statute of limitations, then you will likely be faced with the serious prospects of defending a lawsuit for a balance owed to an old landlord.
- Maybe you have been involved in an accident where you mistakenly hit another driver and caused harm to them physically and also totaled their car. You were left without a car yourself perhaps and to top it all off, you had let your insurance lapse and ended up as an uninsured motorist involved in a serious accident. If the other driver’s insurance paid for their injuries through under-insured or uninsured motorist coverage then they will subrogate this policy and come after you for the amount of money which they paid out to help their customer. This likely becomes similar to squeezing blood out of a turnip. However, the problem with this kind of lawsuit is that the plaintiff is able to hold your license hostage. Because the offense involved in the accident was a no-insurance situation, the plaintiff which is typically the insurance company of the other driver will come after you in a way that they hold your license hostage unless you pay them. So you are faced with the options of either paying them or having your license suspended. Then if you drive, not only are you driving on a suspended license, but because you don’t have a license you’d be unable to get insurance and you’ll be faced with a new penalty for not license and once again for no insurance and these can come with sever penalties.
- Maybe you have done a business deal which went south and you have vendors who are coming after you for funds for broken leases or for unpaid balances on supplies which you used in your business. These types of creditors can be quite aggressive and can result in large balances in lawsuits. The vendor or other creditor such as the SBA suing you for a defaulted SBA loan will become your worst nightmare.
In each of these cases, the solution could be to hire a McKinney bankruptcy lawyer. While bankruptcy is a good option for resolving lawsuits, it does not make it the right choice automatically because there are many factors involved. Maybe you have assets which you have recently inherited and if you were to file bankruptcy these assets would be nonexempt and hence would be within reach of the trustee to sell and use to pay off creditors. In such cases, clients will sometimes choose to take these assets and sell them and use the proceeds to live before filing bankruptcy. This is certainly not recommended, but it is an example of what some people do when they are not sure whether they should file bankruptcy.
If you have been sued for an unpaid SBA Loan, then you will quickly learn that there is almost no statute of limitations for such lawsuits. This is because the laws are written to favor the government in such situations. The SBA loans are fortunately dischargeable in bankruptcy, however, and so they can be wiped out if you are in a position to qualify for a chapter 7 bankruptcy discharge. This could be an effective way to beat a lawsuit against you by the SBA for an unpaid SBA loan.
Furthermore, if you have been sued for an old, broken apartment lease, then bankruptcy could help you wipe out the balance before the holder of a lawsuit judgment decides to become even more aggressive in seeking wage garnishment or bank levies. While wage garnishment is not legal in the state of Texas, the garnishment of wages is legal in almost every other state (46 out of the remaining 49 states allow garnishment of 15%-25% of gross income). Hence, it is important for you to look into the location of your employer’s headquarters and their payroll department as these could impact your situation and affect you with a garnishment even if you live in the state of Texas. A bankruptcy could effectively stop a creditor from exercising their rights to garnish for a lawsuit judgement.