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  1. #1
    Join Date
    Aug 2019
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    Minnesota
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    30

    Default When a Creditor Files Lawsuit on Me Before I File Chapter 7

    My question involves bankruptcy in the state of: Minnesota

    I plan to file Chapter 7 this year of 2020. It is becoming difficult getting an appointment with a lawyer due to Coronavirus, and I am trying to raise the funds to pay a Bankruptcy lawyer, ideally in full, so am without a lawyer right now.

    A law firm that deals only in debt collections has sent me several letters wanting to discuss collecting on a medical bill the health provider placed with them. So far I haven't contacted them, as telling them I will be filing Bankruptcy is obviously totally meaningless to them until I have a Bankruptcy lawyer to talk to them. I really don't want to verbally deal with them at this time.

    Received a letter from this law firm today stating they are planning litigation against me, and to avoid litigation, contact them at once. (I tend to think they will allow me perhaps another month or so to respond before they take action, if they do take action at all. But, I can't assume this.)

    If they do file a lawsuit against me, it would be in small claims court, as the amount due is $ 2428.14.

    My question: If they file a lawsuit on me before I file for Bankruptcy, what happens once they receive notification of my intent to file Chapter 7? Since the Bankruptcy judge hasn't granted me dismissal of my debts at this point, what are their options, if any? Even though there is a good chance this debt (and all of my debts) will be dismissed, does it make sense for them to proceed with the court date, even though they have received the appropriate notification of my Bankruptcy petition? I know, I know, you can't read their minds and don't know what they will do. But, any idea what creditors of this nature "generally" do under these circumstances?

    Thanks for any serious responses.

  2. #2
    Join Date
    Sep 2010
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    19,666

    Default Re: When a Creditor Files Lawsuit on Me Before I File Chapter 7

    It's actually meaningless until you actually file the bankruptcy. The intent letter doesn't invoke the stay. Once you file, they are obliged to stay the proceedings. Note that the case doesn't get "dismissed" it is just stopped from proceeding until the bankruptcy is resolved. Your obligation to the debt may be discharged as a part of the chapter 7, but the creditor still has the right to push their claim with the trustee.

    Understand that the "law firm" that has sent you a threat is one in name only. What they are is your usual scum sucking collection agency masquerading as legal counsel.

    What makes you think they'll file in small claims? Just because the amount is small doesn't bar them from seeking relief in normal court. In fact, when the REAL attorneys get around to filing, they will be obliged to do it in regular court because the claimants aren't permitted attorneys in Minnesnowta small claims.

  3. #3

    Default Re: When a Creditor Files Lawsuit on Me Before I File Chapter 7

    Once a person files for bankruptcy, by law (11 USC 362) there is an automatic stay preventing the commencement or continuation of actions against the debtor to recover money or other property from the debtor. There are some exceptions to this, but it doesn't look like the exceptions would apply to the circumstances you describe in your post.

    If they file in small claims court before you file for bankruptcy, you would have to file a notice in the small claims court advising of the bankruptcy filing. The court will then put the proceedings on hold until/unless the creditor gets an order from the bankruptcy court lifting the stay and allowing the claim to proceed (unlikely that such an order would issue in the circumstances you describe but theoretically possible) or until/unless you receive a discharge from the bankruptcy court or until/unless the bankruptcy case is dismissed without a discharge. Absent a lift-stay order and absent the bankruptcy case being dismissed, the creditors would just share in whatever assets, if any, are distributed in the bankruptcy proceeding to all creditors in accordance with their priority claims to the assets, and then that would be the end of the claim against you.

    There is, as you say, no way to know what these particular creditors would do once you told them you were planning to file for bankruptcy. It probably doesn't cost them much in time or money to file, though, especially if in small claims court. And then either you file for bankruptcy or you don't, and they're not much worse off either way.
    That assumes, of course, that the small claims courts are open to receive the case -- I don't know what the situation is in Minnesota but I know that in some other states the courts won't take those kinds of cases right now in that their facilities and personnel are limited due to COVID19 concerns, and so in those states some kinds of claims, notably civil claims, just have to wait a while.

  4. #4
    Join Date
    Aug 2019
    Location
    Minnesota
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    30

    Default Re: When a Creditor Files Lawsuit on Me Before I File Chapter 7

    That is what I was trying to find out, if the proceedings would be "stayed" once the petition is filed with Bankruptcy court.

    Unfortunately for me, the law firm is a local one, as is the health care provider, so I tend to think they will proceed with a lawsuit.

    Why would anyone, after filing a lawsuit for collection of a debt for $2,400.00, turn to the "normal" court rather than small claims? I though small claims court was for collecting monies under 5 or 6 k? There is no criminal or fraud activity here, just a poor (getting) older sickly man who can't pay his debts.

    Thanks for your response.

    You've answered my question(s), thank you!
    I don't know for a fact, but I have "heard" that the courts here in the great state of Minnesnowta are only doing cases that are necessity, such as criminal matters. Evictions and foreclosures are suspended. I understand jails are releasing some charges early.
    It is almost impossible to get a doctor's appointment unless it is extremely urgent.

    My gut reaction prediction is that the courts will be inundated with bankruptcies, evicions, foreclosures and collection cases as this virus winds down and the businesses that survived their economic losses due to this pandemic re-open,

    This response was intended for Middlepart.
    You've answered my question(s), thank you!
    I don't know for a fact, but I have "heard" that the courts here in the great state of Minnesnowta are only doing cases that are necessity, such as criminal matters. Evictions and foreclosures are suspended. I understand jails are releasing some charges early.
    It is almost impossible to get a doctor's appointment unless it is extremely urgent.

    My gut reaction prediction is that the courts will be inundated with bankruptcies, evicions, foreclosures and collection cases as this virus winds down and the businesses that survived their economic losses due to this pandemic re-open,

  5. #5
    Join Date
    Jul 2018
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    2,336

    Default Re: When a Creditor Files Lawsuit on Me Before I File Chapter 7

    Quote Quoting mrtenebrae
    View Post
    If they file a lawsuit on me before I file for Bankruptcy, what happens once they receive notification of my intent to file Chapter 7?
    The lawsuit would automatically be stayed (i.e., held in abeyance) pending either discharge or dismissal of the bankruptcy or the granting of a motion for relief from stay. If you receive a discharge, then the lawsuit would be dismissed. If the bankruptcy is dismissed or the court grants relief from stay, the lawsuit would proceed where it left off.


    Quote Quoting mrtenebrae
    View Post
    Even though there is a good chance this debt (and all of my debts) will be dismissed, does it make sense for them to proceed with the court date, even though they have received the appropriate notification of my Bankruptcy petition? I know, I know, you can't read their minds and don't know what they will do. But, any idea what creditors of this nature "generally" do under these circumstances?
    First of all, the debt would get discharged, not "dismissed." Second, any creditor or agent of a creditor (including an attorney representing a creditor) who continues to act in furtherance of the collection of a debt after being notified of a bankruptcy filing would be subject to sanction by the bankruptcy court. Generally, one party or the other would file a notice of bankruptcy with the court where the debt lawsuit is pending so that the court also becomes aware.

  6. #6
    Join Date
    Sep 2010
    Posts
    19,666

    Default Re: When a Creditor Files Lawsuit on Me Before I File Chapter 7

    Why would anyone, after filing a lawsuit for collection of a debt for $2,400.00, turn to the "normal" court rather than small claims? I though small claims court was for collecting monies under 5 or 6 k? There is no criminal or fraud activity here, just a poor (getting) older sickly man who can't pay his debts.
    As I stated, the reason is that attorneys can't represent the claimant in small claims. If there are lawyers involved, they will file in regular court. In fact, typically attorneys LIKE to remove things to civil court because it puts them on a better footing.

    Yes, debt actions are probably not happening. Even criminal trials down here are only being done on things that have statutory time limits. They won't impanel a (petit) jury until at least June.

  7. #7
    Join Date
    Oct 2014
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    7,917

    Default Re: When a Creditor Files Lawsuit on Me Before I File Chapter 7

    Quote Quoting flyingron
    View Post
    in Minnesnowta small claims.
    Interesting misspelling. Minnesota certainly does get a lot of snow.

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