When Filing Bankruptcy Can Stop Pending Lawsuits

Nobody wants to be sued. But, this may happen if you have amassed debts you cannot pay. If you are in desperate financial circumstances, you may want to consider filing bankruptcy. However, what if you already have a lawsuit pending? Will filing bankruptcy now make a difference?

If someone has sued you for money damages that you cannot pay, filing for bankruptcy may help. The act of filing brings an automatic stay to a lot of kinds of pending lawsuits. 

What is Automatic Stay

Once you file bankruptcy, the majority of pending lawsuits are stopped in their tracks. The reason is that most lawsuits are about money. But, this cannot stop lawsuits associated with criminal charges. Criminal cases have to do with a loss of rights and liberty while civil cases have much more to do with money. Thus, filing for bankruptcy cannot stop criminal lawsuits. An experienced provider of las vegas bankruptcy service can distinguish between criminal and civil cases as well as help you determine if the judge will stay your case while your bankruptcy is pending. 

Civil Cases

Because civil cases have much more to do with money, they may be stopped during a pending bankruptcy. Examples of these cases that a bankruptcy filing can stop include debt collection lawsuits, negligence-related cases where compensation is demanded, breach of contract actions, business-related disputes between owners, and home foreclosures. These claims can be dismissed or otherwise handled by the bankruptcy court. But, not all civil cases may be stayed by filing bankruptcy. The following are examples of cases that proceed despite bankruptcy:

  • Divorce and child support. A pending bankruptcy will not affect child support matters and divorce proceedings. Although the family court is civil in nature, the determinations as to alimony, child custody, child support, and asset division can go forward.
  • Requests to lift the stay. Creditors who have a good reason to request the lifting of an automatic stay can submit a formal request to the court. This is possible if creditors on car loans may offer the debtor the option to sign a new contract and continue to pay for the car. Also, the bankruptcy court may refrain from getting involved in a case where the debtor has been accused of fraud by their creditor, so it may let the fraud case continue and resolve on its own. 

The circumstances that lead people to consider declaring bankruptcy can be painful. Thankfully, a bankruptcy attorney can assist them to get out of the crippling debt and move towards a better future.

Written by 

Alex Wilson: Alex, a former tech industry executive, writes about the intersection of business and technology, covering everything from AI to digital transformation.