Lawsuit dismissed after filing for chapter 7....why?

[Flatbroke1]

I was sued by a Houston lawyer for BOA. I had received the summons 12-30-2009. So I had no choice but to file for chapter 7 on Feb 1, 2009. I faxed the lawyer with my bankruptcy case number. Now the lawyer has sent a notice of "non-suit and dismissal". Looks like they are "un-suing" me if I understand all this correctly. Why would they do that?

[OhioFiler]

Why do you think they wouldn't "unsue" you?

[Flatbroke1]

That is what I am wondering.....I have already filed for chapter 7 and have no assets....perhaps if they would have left the suit pending with the court at some point there would have been extra costs involved for them. So, I suppose they dropped the suit to not "throw good money after bad".....?

[mama2three]

They dropped the suit because the debt will be discharged upon the completion of your BK and they can't legally come after you for the debt

[OhioFiler]

That is what I am wondering.....I have already filed for chapter 7 and have no assets....perhaps if they would have left the suit pending with the court at some point there would have been extra costs involved for them. So, I suppose they dropped the suit to not "throw good money after bad".....?

The attorney was probably handling the case as a collector. Once there is nothing to collect he has no interest in you.

[DeadManCrawling]

They HAD to drop the suit, or risk being penalized in major fashion, possibly as far as being disbarred, or huge financial sanctions against them.

When you filed CH 7, a federal law went into play for you, which requires ALL collection actions to cease. The lawsuit was a collections action. They dropped the suit because they do not want to be yanked in front of a federal judge to explain why they continue to violate the law.

You are, during the CH 7, protected by the "Automatic Stay". This means that the collectors hands are "stayed". That is, they cannot pursue you for debt. In the event a creditor has a secured asset involved, they would ask the court for "Relief From The Automatic Stay" so they could pursue the asset and protect their interest in the secured asset. This would apply to homes, cars, real estate, etc.

If your CH 7 proceeds as usual and you are discharged, they will never again be able to collect on the debt. Any future attempt to is illegal. Should this occur, you can sue them and win money.

[Flatbroke1]

Okay, I knew the bankrupcty would take care of lawsuits and judgements, but I didn't realize they'd actually have to DROP the lawsuit.....what you said makes sense. I just didn't know if they were dropping it with the plan of doing something sinister, like showing up at the 341 or contesting or something.

[catleg]

Filing for BK is like opening a big can of whoop ass on those state court collection lawsuits.

[billf]

They HAD to drop the suit, or risk being penalized in major fashion, possibly as far as being disbarred, or huge financial sanctions against them.

But do they have to actually drop the suit? Or just let it hang in there in case the ch7 is dismissed? I understand a 'suggestion of bankruptcy' is filed by the lawyer in answer to the summons. I have no idea what this means.

[ryan]

Filing for BK is like opening a big can of whoop ass on those state court collection lawsuits.

Now that's one funny way to put it!

[BKDefender]

They don't have to drop the lawsuit. They would file a 'suggestion of bankruptcy' with the court and the court would 'pause' the case. They just let it hang there waiting for your BK case to be dismissed if you mess up your BK case. If it gets dismissed they press 'play' and keep going. But if you successfully get your discharge then you would file the discharge with the court handling the lawsuit and that court would then dismiss the case permanently.

I don't know why the collections attorney dismissed the case unless it's their policy to do so.

--William

[DeadManCrawling]

Yes, the suggestion of bankruptcy is another avenue. I have heard of them being filed, but it's somewhat rare, at least in my district.

Ad, yes, they are pressing the "pause" button. If your case is dismissed, they start where they left off.

In our area, I suppose the dismissal rate is low enough that most collectors just drop the suits. There isn't any upside for them. It is their call, I guess, but they apparently do not have successful outcomes here very often, and usually just dismiss.