Q: A collection agency is threatening me with a lawsuit. Is it too late to file for bankruptcy?

A: No. If the underlying debt can be discharged in bankruptcy (and most unsecured debts such as medical bills, credit card debt, old utility bills, etc. can be), then the debt can still be discharged if there is a lawsuit in progress, or even if the debt has already been reduced to judgment.

In most cases, an automatic stay takes effect as soon as a bankruptcy case is filed, and that stay prohibits further collection action. Thus, if a collection agency was planning to file a lawsuit, a bankruptcy filing would prevent them from doing so. If the lawsuit had already been filed, the automatic stay would stop it from going forward.

That said, you would be wise to talk with a local bankruptcy attorney soon, rather than waiting until the collection agency has taken the next steps.

*Kevin Chern is Managing Partner of UpRight Law, a national law firm with licensed attorneys providing bankruptcy and consumer legal services in all 50 states. He is an Illinois licensed attorney with 21 years of federal consumer bankruptcy and consumer protection law experience. This response is for informational purposes only and is not intended to be legal advice. For legal advice, consult an attorney licensed in your state with the appropriate expertise.

A: It is also worth noting that if in fact a collection agency has claimed that it is planning to sue you, the agency may have violated the Fair Debt Collection Practices Act. A collection agency that is not a law firm and is acting on behalf of the creditor cannot sue you, meaning that claim would be a false representation.

Note that this would not apply if the agency actually said it would refer the account for litigation or something to that effect.

When you speak with a bankruptcy attorney, make sure you mention this claim and find out whether the agency's actual threat violates the FDCPA, since statutory damages may apply.

*David Levin is the Partner in charge of UpRight Law's consumer rights litigation department. UpRight Law is a national law firm with licensed attorneys providing bankruptcy and consumer legal services in all 50 states. He is licensed in Illinois, Ohio and West Virginia, as well as several United States District Courts. He has 22 years of litigation experience, the last 18 of which have been focused on consumer rights litigation. This response is for informational purposes only and is not intended to be legal advice. For legal advice, consult an attorney licensed in your state with the appropriate expertise.