Can Bankruptcy Stop a Lawsuit?


Filing for bankruptcy can be a lifesaver when you struggle with insurmountable debt. But did you know that bankruptcy can also stop lawsuits? This is just one of the many benefits of filing for bankruptcy. Our Knoxville bankruptcy attorneys discuss how bankruptcy can stop civil judgments, the types of civil lawsuits it will stop, and what lawsuits will continue even after filing for bankruptcy.

Why Bankruptcy Stops Civil Lawsuits

An automatic stay is placed when you file for bankruptcy, stopping most civil lawsuits. Creditors cannot continue their collection activities, including suing for money judgments, due to this injunction.

During the automatic stay, the court can also determine how your assets will be divided among your creditors so that no creditor receives a disproportionate amount of your assets. In this case, you would have no funds to repay your other creditors.

Is Bankruptcy a Civil Judgement?

Bankruptcy itself is not a civil judgment. If a creditor gets a judgment against you and the debt is dischargeable in a Chapter 7 bankruptcy, you will lose your right to collect. However, a judgment can create a lien on your property. Bankruptcy does not automatically remove liens. Consequently, a judgment can be wiped out in bankruptcy while the lien is still owed.

Lawsuits That Bankruptcy Stops

A bankruptcy court has jurisdiction over any case alleging that you owe someone money once your bankruptcy case is approved. This could be due to failure to pay a debt or being held liable for someone's accident injuries. The court would handle the underlying debt for qualifying cases, and the lawsuit would be dismissed.

Bankruptcy can stop the following types of lawsuits:

  • Breach of contract disputes
  • Unpaid credit card balances
  • Home foreclosure
  • Wage garnishments
  • Compensation for a personal injury case
  • Financial disputes between business partners
  • Collection of a deficiency balance

Depending on the type of civil lawsuit or debt that forms the lawsuit's basis, bankruptcy will affect your lawsuit differently. It is highly recommended to consult with a certified bankruptcy attorney to learn how filing can affect your particular case.

What if the Creditor Gets a Judgment Against Me?

Some lawsuits can't be stopped by bankruptcy. Such lawsuits include:

  • Divorce proceedings
  • Child custody disputes
  • Actions to collect alimony or child support payments
  • Criminal charges against you

Bankruptcy can, however, discharge the debt that arises from a divorce settlement or child support order. This means that you will no longer be legally obligated to repay the debt, even though the court may still order you to pay.

Get The Law Offices Of Mayer & Newton On Your Side

In addition to debt relief, bankruptcy has many other benefits. You could, however, put yourself in a worse situation than before you filed without the right help and planning. At The Law Offices Of Mayer & Newton we provide clients with the legal guidance they need from start to finish. Our skilled team of bankruptcy attorneys is equipped to handle complex cases and help you determine the best course of action for your specific circumstances.

Call The Law Offices Of Mayer & Newton at (865) 328-7993 today to get on the path to financial freedom.