Receiving a lawsuit from a creditor can be a stressful experience for a debtor. If you are already struggling with debt and a creditor has filed a lawsuit against you in Georgia, you might be wondering if filing for bankruptcy could stop the case and what would happen to any existing judgment. The short answer is that bankruptcy can indeed intervene, but the timing and type of bankruptcy filed are important factors.
How Creditors Sue for Unpaid Debts
When you fall behind on payments for a credit card, medical bill, or personal loan, your creditor may file a civil lawsuit in state court. In Georgia, they typically have to do this within six years of when the debt became overdue, according to the state’s statute of limitations for written contracts. If you don’t respond to the court’s summons within that timeframe, they can get a default judgment against you, giving them the legal right to collect the debt.
What a Judgment Creditor Can Do to You
Once a creditor has obtained a court judgment in Georgia, they have access to powerful collection tools. These tools include:
- Wage garnishment: Georgia law allows creditors to take up to 25% of a person’s disposable weekly earnings as part of a judgment.
- Bank account levy: A creditor can freeze and take funds directly from a person’s checking or savings accounts.
- Property liens: A judgment can be recorded against real estate owned in Georgia, making it difficult to sell or refinance in the future.
- License revocation: In some cases, unpaid judgments may affect professional licenses in Georgia.
How the Automatic Stay Stops a Lawsuit Instantly
Filing for bankruptcy, whether under Chapter 7 or Chapter 13, triggers what is known as the automatic stay under 11 U.S.C. § 362. This automatic stay comes into effect immediately after your petition is filed and:
- Halt all pending lawsuits and collections against you.
- Stop wage garnishments and bank levy in progress.
- Prevent creditors from recording new liens or seizing assets.
- Prohibit creditor phone calls, letters, and legal filings.
What Happens to an Existing Judgment?
If a judgment has already been entered against you prior to filing for bankruptcy, you may still be able to obtain significant relief. Under 11 U.S.C. § 522(f), it is possible to avoid a judicial lien on exempt property, such as your home, if the lien violates an exemption you are eligible for under Georgia law. It is important to note that Georgia debtors are required to use the state’s exemption scheme, which provides an individual with a $21,500 homestead exemption as of 2026.
A Chapter 7 bankruptcy will eliminate your underlying debt, even if there is a judgment against you. However, any liens that have already attached to your property may still be in place. To avoid this, you need to take specific legal steps through the bankruptcy court to remove them.
Chapter 7 vs. Chapter 13: Which Is Right for You?
If a creditor has already sued you or obtained a judgment, it is crucial to choose the right bankruptcy chapter:
- Chapter 7 – This chapter discharges most unsecured debts within 3-6 months. It is ideal if you have limited income and want a quick resolution. The means test determines eligibility.
- Chapter 13 – This chapter allows you to repay debts over a 3-5 year court-approved payment plan. It is better suited for homeowners who are trying to stop foreclosure or remove certain liens from their property.
Act Quickly – Timing Is Everything
If a creditor files a lawsuit, every day counts. Once a judgment is entered and a lien is attached to your real property, removing that lien through bankruptcy becomes more complicated. Acting before the judgment is issued or at least before wages are seized provides you with the most protection and flexibility in structuring your bankruptcy case.
At Duncan Bankruptcy Law, we help residents of Georgia understand their rights and take decisive action before creditors’ judgments cause irreparable financial harm. Whether you are facing an active lawsuit or a wage garnishment notice, our team can help you navigate Chapter 7 or Chapter 13 bankruptcy options tailored to your unique situation. Schedule a consultation today.
