Can Bankruptcy Stop a Credit Card Debt Lawsuit?

Filing for bankruptcy can stop a lawsuit brought by any creditor, and release the debtor of liability to repay credit card debt.

If you are being sued for an unpaid credit card bill, filing for bankruptcy relief can stop the lawsuit and discharge your obligation to pay back the debt. Read on to learn more about how bankruptcy can stop the credit card company’s lawsuit.

For more information on how bankruptcy protects you from creditors, see our topic area on Bankruptcy’s Automatic Stay.

The Automatic Stay Will Stop or Delay the Lawsuit

The moment you file for bankruptcy, an automatic stay goes into effect. The automatic stay prohibits most creditors from initiating or continuing their collection activities including lawsuits. If a credit card company has already filed a lawsuit against you to collect its debt, it cannot proceed any further while the stay is in effect without permission from the bankruptcy court. While creditors are free to ask the court to lift the stay, credit card companies normally don’t have any legal grounds to seek relief from the stay.

Your Discharge Will Eliminate Your Liability for the Debt

Once you receive a bankruptcy discharge, your personal liability for the unpaid credit card debt will be wiped out. As a result, the lawsuit will typically be dismissed after your case is discharged. But keep in mind that if your case is dismissed without a discharge, then the lawsuit will continue where it left off after your case is closed. Also, if the credit card company has already obtained a judgment against you and placed a lien on your property, your discharge will not automatically get rid of that lien.

To learn more, see Are Lawsuit Judgments Discharged by Bankruptcy?

The Credit Card Company Has the Right to Object to Your Discharge

Under certain circumstances, the credit card company may have grounds to object to your bankruptcy discharge and argue that its debt should not be wiped out. A credit card company may file an objection to your discharge if you obtained the debt by fraud or charged your card shortly before filing for bankruptcy.

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