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Four Ways to Contest a Credit Card LawsuitCredit card companies use lawsuits as a means of forcing clients to pay for outstanding debts. If the court rules in favor of the company, the company can place a lien on the debtor’s real property or seize non-exempt personal property (think toys – motorcycles, dirt bikes). However, many judgments in favor of credit card companies are default judgments because the defendant cardholder does not respond to or contest the lawsuit. If you choose to contest the lawsuit, the credit card company will bear the burden of proving that you owe the debt. There are several ways to contest a lawsuit from a credit card company:

  1. Statute of Limitations Expired: In Texas, a credit card company has four years to file a lawsuit against you for lack of payment, starting from the date of your last payment. If it has been longer than four years, the statute of limitations has expired.
  2. Improper Service of Lawsuit: The credit card company must serve you notice of the lawsuit it has filed against you, either in person or by certified mail. If the server cannot find you, the company may request service by publication. If all attempts to serve you fail, the company may receive a default judgment. However, the company must make a good faith effort to find you.
  3. Violation of Fair Debt Collection Practices Act: The FDCPA protects consumers from abusive or misleading practices by credit card companies and related debt collectors. You can file a countersuit, claiming that the creditor violated your rights under the FDCPA.
  4. Debt Already Paid: A credit card company may come after you for a debt you have already paid. You can dispute the lawsuit by providing documentation that you have already paid the debt, either in full or in part. The lawsuit cannot demand more money than what you actually owe unless it is interest on the loan, court costs, or attorney fees.

Contesting Credit Card Debt 

There are multiple positive outcomes you can obtain by responding to a lawsuit from a credit card company. You can receive a favorable ruling from the court if the statute of limitations has expired, or you can convince the company to settle out of court for less than what you owe. However, you must respond quickly once you have received notice of the lawsuit. A Frisco, Texas, bankruptcy attorney at The Page Law Firm can guide you through your response to the lawsuit and represent you in your case. Schedule a free consultation by calling 214-618-2101.

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Making Sure to Include All Creditors in a Bankruptcy FilingFailing to list all of your creditors during your bankruptcy case might mean that you cannot discharge the debt, especially if you intentionally omit a creditor. If the case is ongoing, you can amend your bankruptcy Schedules to include an additional creditor. However, fixing your mistake is trickier if you have already completed your bankruptcy and your debts have been discharged. You may be responsible for the debt to your missing creditor.

Chapter 7 and No-Asset Cases

If you discover a missing creditor after a Chapter 7 bankruptcy case, your liability may depend on whether you had a no-asset case. In a no-asset bankruptcy, the trustee does not liquidate any assets because they are all exempt, and your debts are still discharged. So, a bankruptcy court may rule that the debt from an omitted creditor in a no-asset case is already discharged because the creditor would not have received money from the bankruptcy. Most Chapter 7 cases in Texas are no-asset cases. However, this ruling does not apply if the creditor has a debt that is considered non-dischargeable, such as child support, alimony or certain taxes. 

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Choosing Whether to File for Bankruptcy Before or After DivorceDivorce and bankruptcy are both legal processes that can help you reconstruct your life. In some cases, people need both divorce and bankruptcy at the same time. In fact, either one can lead to the other:

  • Financial stress can cause conflict in a marriage; or
  • Divorce can be expensive and leave each side with less income to use towards debt repayment.

If you know you are likely to file for both divorce and bankruptcy, choosing which one you do first can affect how your bankruptcy case is settled and which form of bankruptcy you qualify for.

Bankruptcy Before Divorce

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Discharging Student Debt Through Bankruptcy Is Difficult, But Not ImpossibleThere is a common misconception that filing for bankruptcy will not allow you to discharge your student loan debts. Discharge is not impossible, but it is very difficult. You must file a separate action, called an adversary proceeding, in which you argue that continuing to pay for your student loans would cause you undue hardship. If your case is successful, the court may partially or fully discharge your student debt. However, some courts have stricter definitions of undue hardship than others.

Brunner Test

Most federal courts use the Brunner test to determine undue hardship. The court may decide that your student loan debt qualifies for discharge if:

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Important Differences Between Secured, Unsecured Creditors during BankruptcyOne way to categorize creditors when filing for bankruptcy is as secured or unsecured. The distinction between them can be important for both your creditors and yourself:

  • Secured creditors have a lien on your property that they can use as collateral if you are unable to repay your loan. Common examples include home loans, car loans, and tax liens;
  • Unsecured creditors do not have a lien that they can claim on your property. Credit card debt, payday loans, and medical bills are often categorized as unsecured debts; and
  • Some unsecured debts are priority debts that must be paid in full, regardless of bankruptcy protections. Child support, spousal support, student loans and some tax debts are common examples.

Secured creditors generally receive priority in being compensated during bankruptcy proceedings. How creditors are compensated depends on whether you are filing for Chapter 7 or Chapter 13 bankruptcy.

Secured Creditors in Chapter 7

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National Association of Consumer Bancruptcy Attorneys State Bar of Texas
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