Suing a Creditor in Bankruptcy

 Posted on May 16, 2026 in Bankruptcy

Most people think about bankruptcy as a purely defensive process. You file for bankruptcy, the process immediately offers certain protections, and eventually your debts are wiped out or affordably restructured. What many people don't realize is that bankruptcy also gives you real tools to go on the offense when creditors step out of line or when a debt's status is genuinely unclear. 

If you are dealing with a creditor who won't follow the rules or a debt that isn't clearly covered by your discharge, you may have the right to sue that creditor directly in bankruptcy court. This might sound intimidating, but bankruptcy court is actually one of the most practical places to resolve these issues. You also already have a Texas bankruptcy attorney on your side who knows your situation and whether credit card companies are doing things they shouldn’t. 

What If It Is Not Clear Whether a Debt Will Be Discharged in Bankruptcy?

A discharge is the legal elimination of a debt. When your Chapter 7 bankruptcy case is complete, discharged debts are gone permanently and creditors can no longer legally pursue you for them. Most debts either qualify or don’t qualify without any issues. Medical bills, credit card balances, and personal loans are classic examples. Other debts, like criminal fines and most recent tax obligations, are never dischargeable.

But some debts fall into a gray area, and this is where a court action called an "adversary proceeding" can help. An adversary proceeding is essentially a lawsuit filed as part of your bankruptcy case. It asks the bankruptcy judge to make a binding ruling on a specific legal question. Here are a couple of examples. 

Divorce Settlement Debts vs. Spousal Support

The debt might fit a category that cannot be discharged, but it is not obvious whether it actually does. A common example involves divorce-related obligations. Under Section 101(14A)(B) of the U.S. Bankruptcy Code, genuine spousal support and debts that are "in the nature of support" cannot be discharged. 

However, property settlement debts can sometimes be discharged under Chapter 13. If your divorce agreement included an obligation that could be read either way, such as transferring ownership of a vehicle in exchange for reduced support payments, it may be worth asking a bankruptcy court to classify it as a property settlement rather than support. That ruling could allow you to discharge the obligation and keep the asset.

Income Tax Debts

Income taxes are another good example. Some income tax debts can be discharged just like any other debt, but only if certain conditions are met. Most of those conditions involve straightforward timelines, such as how long ago the tax return was filed. Others are more subjective. Under Section 523(a)(1)(C), a tax debt cannot be discharged if the taxpayer willfully tried to evade or defeat the tax. Whether someone's conduct rises to that level is a factual and legal question. If a large tax debt is on the line, litigating that question in bankruptcy court may be well worth it.

Can You Sue a Creditor for Violating the Automatic Stay?

One of the most immediate benefits of filing for bankruptcy is something called the automatic stay. The moment you file your case, the automatic stay goes into effect under Section 362 of the Bankruptcy Code. It stops virtually all collection activity in its tracks. Wage garnishments must stop. Lawsuits must be paused. Collection calls must end. The automatic stay gives you breathing room and makes sure every creditor follows the same rules during your case.

Most creditors comply because they know they are required to. Occasionally a creditor continues to pursue collection action even after being notified of your bankruptcy filing. That is a violation of federal law.

If a creditor violates the automatic stay and causes you harm, Section 362(k) of the Bankruptcy Code gives you the right to sue them. The consequences for the creditor can be significant:

• You may be entitled to recover your actual damages, including any wages that were wrongfully garnished or costs you incurred because of the violation.

• The creditor may be required to pay your attorney's fees for bringing the action.

• In cases of willful violations, the court may also award punitive damages, which are designed to punish the creditor and deter future misconduct.

The bankruptcy system depends on creditors following the rules. When they don't, the law lets you try to hold them accountable. If any creditor takes collection action against you after you file for bankruptcy, contact your bankruptcy attorney right away. 

What If a Creditor Tries to Collect a Debt That Has Already Been Discharged in Bankruptcy?

Once your bankruptcy case is complete and your debts are discharged, the discharge order acts as a permanent injunction. Under Section 524(a)(2) of the Bankruptcy Code, creditors are legally prohibited from taking any action to collect, recover, or offset a discharged debt as a personal liability. The debt is legally gone, and the creditor has no right to come after you for it.

Most creditors follow this rule without issue. However, some collection companies, particularly those that buy old debts in bulk, occasionally attempt to collect on accounts that were discharged years earlier. This is illegal. If it happens to you, you can bring an action in bankruptcy court to enforce the discharge and seek damages.

This is not something most people who file for bankruptcy will ever deal with, but you should monitor your credit reports regularly after your bankruptcy case closes just in case. If a discharged debt reappears or a creditor contacts you about it, talk to your attorney. 

Call a Boerne, TX Consumer Bankruptcy Attorney Today

If you have questions about your rights during or after bankruptcy, or if you think a creditor has been violating the rules, speak with a Kerrville, TX bankruptcy lawyer at the Law Offices of Chance M. McGhee. With over 20 years of experience, the Law Offices of Chance M. McGhee offers free consultations and personal guidance from start to finish. Call 210-342-3400 today.