How to Stop a Civil Lawsuit by Filing Bankruptcy in Court

If you’re facing a civil lawsuit and overwhelmed by mounting legal fees and potential financial burdens, filing for bankruptcy could provide a much-needed lifeline. Will filing bankruptcy stop a civil lawsuit? The answer is a resounding yes, at least temporarily. Bankruptcy laws offer powerful protections that can halt creditors’ actions, including civil lawsuits, and give you the breathing room to restructure your finances.

Impact of Bankruptcy Filing on Civil Lawsuits

When you file for bankruptcy, an automatic stay immediately goes into effect. This legal provision acts as a powerful shield, temporarily preventing most creditors from pursuing further collection actions against you, including civil lawsuits. The automatic stay halts ongoing lawsuits and prevents new ones from being initiated, providing you with much-needed respite from the stress and financial strain of legal battles.

However, it’s important to note that the automatic stay is not an absolute barrier. Certain types of civil lawsuits may be exempt from the stay, allowing them to proceed despite your bankruptcy filing. These exceptions include lawsuits involving domestic support obligations, such as alimony or child support, lawsuits stemming from willful and malicious injury, and cases involving debts obtained through fraud or false pretenses.

Types of Civil Lawsuits Affected by Bankruptcy

The automatic stay provision in bankruptcy law casts a wide net, halting various types of civil lawsuits against the debtor. Here are some common civil lawsuits that can be stopped, at least temporarily, by filing for bankruptcy:

  • Breach of contract lawsuits: If a creditor has sued you for breaching a contract, such as a lease agreement or loan, the lawsuit will be halted by the automatic stay.
  • Personal injury lawsuits: Lawsuits seeking damages for personal injuries, such as car accidents or slip-and-fall incidents, can be stopped temporarily by filing for bankruptcy.
  • Debt collection lawsuits: If a creditor has initiated a lawsuit to collect unpaid debts, such as credit card balances or medical bills, the lawsuit will be halted by the automatic stay.
  • Discrimination lawsuits: Civil lawsuits alleging discrimination in employment, housing, or other areas can be temporarily stopped by filing for bankruptcy.
  • Unlawful termination lawsuits: If you’ve been sued by a former employer for unlawful termination or wrongful dismissal, the lawsuit can be halted by filing for bankruptcy.

It’s important to note that while the automatic stay provides temporary relief, the underlying debt or legal claim may not be discharged or resolved by the bankruptcy filing itself. The stay merely buys you time to reorganize your finances and potentially reach a settlement or resolution with the opposing party.

Bankruptcy Chapters and Their Effect on Civil Lawsuits

The impact of bankruptcy filing on civil lawsuits can vary depending on the specific chapter of bankruptcy you choose to pursue. Here’s a brief overview of how different bankruptcy chapters can affect civil lawsuits:

  1. Chapter 7 bankruptcy : This chapter involves the liquidation of non-exempt assets to pay off eligible debts. Civil lawsuits against the debtor are typically halted, and eligible debts, including judgments from civil lawsuits, may be discharged.
  2. Chapter 13 bankruptcy : This chapter involves a court-approved reorganization plan to repay debts over a three to five-year period. Civil lawsuits are temporarily halted during the bankruptcy process, but creditors may be able to resume their lawsuits after the bankruptcy case is closed, depending on the terms of the reorganization plan.
  3. Chapter 11 bankruptcy : This chapter is primarily used by businesses to reorganize and restructure their debts while continuing operations. Civil lawsuits against the business are temporarily halted during the bankruptcy process, allowing the company to focus on its reorganization efforts.

It’s crucial to consult with a qualified bankruptcy attorney to understand how the specific chapter you choose will impact any civil lawsuits you’re facing. They can guide you through the process and help you make informed decisions to protect your rights and financial interests.

Exceptions: Civil Lawsuits that Can Proceed Despite Bankruptcy

While the automatic stay provides broad protection against civil lawsuits, there are certain exceptions where lawsuits can proceed despite a bankruptcy filing. These exceptions include:

  • Lawsuits involving domestic support obligations : Civil lawsuits related to alimony, child support, or other domestic support obligations are typically exempt from the automatic stay. Creditors can continue to pursue these lawsuits even after you’ve filed for bankruptcy.
  • Lawsuits involving willful and malicious injury : If a civil lawsuit alleges that you caused willful and malicious injury to another person or their property, the automatic stay may not apply. These types of lawsuits can continue despite your bankruptcy filing.
  • Lawsuits involving debts obtained through fraud or false pretenses : Creditors may be able to proceed with civil lawsuits if they can prove that the debt was incurred through fraud, false pretenses, or misrepresentation on your part.
  • Criminal proceedings and certain tax-related lawsuits : The automatic stay does not apply to criminal proceedings or certain tax-related lawsuits, such as those brought by government entities to collect unpaid taxes.

It’s essential to disclose all pending civil lawsuits and potential claims when filing for bankruptcy to ensure that the appropriate protections or exceptions are applied.

Timing: When to File Bankruptcy to Stop a Civil Lawsuit

The timing of your bankruptcy filing can significantly impact its effectiveness in stopping a civil lawsuit. Here are some key considerations:

  1. Filing before the lawsuit is initiated : If you file for bankruptcy before a creditor has initiated a civil lawsuit against you, the automatic stay will prevent them from filing the lawsuit in the first place.
  2. Filing after the lawsuit has commenced but before judgment : If a lawsuit has already been filed against you, filing for bankruptcy will halt the proceedings and prevent the creditor from obtaining a judgment against you until the bankruptcy case is resolved.
  3. Filing after judgment but before collection efforts begin : Even if a creditor has already obtained a judgment against you, filing for bankruptcy can still halt their collection efforts, including wage garnishments, bank account levies, and property seizures.

It’s important to note that filing for bankruptcy after a judgment has been entered may not automatically discharge the debt or overturn the judgment. However, it can provide you with valuable time to negotiate a settlement or seek relief through the bankruptcy process.

While the automatic stay can provide powerful protection against civil lawsuits, navigating the bankruptcy process can be complex and nuanced. It’s highly recommended to consult with a qualified bankruptcy attorney to ensure that you fully understand your rights and obligations, as well as the potential impact of your bankruptcy filing on any pending civil lawsuits.

A bankruptcy attorney can evaluate your eligibility for bankruptcy and assess the potential impact on civil lawsuits you’re facing. They can guide you through the process of gathering the necessary documentation and preparing for the bankruptcy filing, ensuring that you comply with all legal requirements.

More importantly, a skilled bankruptcy attorney can advocate on your behalf, negotiating with creditors and opposing parties to reach favorable settlements or resolutions. They can also ensure that your rights are protected throughout the bankruptcy process and that you receive the full protections and benefits afforded by the bankruptcy laws, including the automatic stay against civil lawsuits.

While filing for bankruptcy can be a difficult decision, it may provide the necessary protection and breathing room to address your financial challenges and regain control of your life. By working closely with a bankruptcy attorney and understanding the impact of bankruptcy on civil lawsuits, you can make informed decisions and take proactive steps towards a fresh start.