What are theconsequences can one expect for filing for bankruptcy to avoid paying a civil lawsuit?

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What are theconsequences can one expect for filing for bankruptcy to avoid paying a civil lawsuit?

Lawsuit settled out-of-state. Own home outright with a HELOC for about 50K in use. No other debts. How and for how long will this affect me? I have excellent credit and want to try to keep my current credit cards, and continue to pay on my other minor debts. Can my HELOC be revoked?

Asked on August 15, 2010 under Bankruptcy Law, Nevada

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Bankruptcy is not selective; it will affect all your debts, obligations, and credit lines.

1) How long will it affect you? Typically, bankruptcy will remain on your credit report for 10 years.

2) The impact of bankruptcy? Besides the notation of a "bankrutpcy," it will reduce your credit score by (probably) 200 - 300 points.

3) Can a HELOC--or, for that matter, credit cards, etc.--be revoked or closed out? Almost certainly. The agreements for credit like that usually states that the lender/issuer can close the account more-or-less at will, and they may choose to do so if you declare bankruptcy (the HELOC lender may also call the amount due); indeed, some agreements specify that any debt comes due and/or that the account *will* be closed in the event of bankruptcy.

In short, if you declare bankruptcy, it will have a profound effect, for many years, on your credit and finances. This doesn't mean that it may not be the right thing to do, but you must weigh those consequences carefully. A bankruptcy attorney can help you determine if bankruptcy is right for you, and also which type (e.g. Ch. 7 or Ch. 13) is your best option. Good luck.


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