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Can I Stop a Lawsuit by Filing Bankruptcy?

Liviakis Law Firm Team

Having to face a lawsuit is by far one of the most stressful things a person can endure. By filing for bankruptcy protection, you are automatically given what is called an “automatic stay” which legally stops creditors from collection activities, including lawsuits which they are pursuing against you.

Stop Debt Lawsuits

The automatic stay prevents creditors from using their collection powers obtained by a judgment in their favor such as wage garnishments, real estate liens, and bank account seizures. The way to stop a lawsuit by filing bankruptcy is to have your bankruptcy attorney file paperwork that informs the Judge from your debt collection lawsuit to wait until your bankruptcy is completed. If your debt from the lawsuit is discharged, the lawsuit will typically be dismissed.

Lawsuits that can’t be Stopped by Bankruptcy

There are a few types of lawsuits that bankruptcy can’t protect you from. These lawsuits that can’t be stopped by bankruptcy include divorce proceedings and criminal cases. Essentially, bankruptcy doesn’t stop these cases because the debts have to be paid even when you file bankruptcy. So if you are being tried for a crime which is punishable by jail time, bankruptcy won’t halt the process.

Motion to Lift Automatic Stay

A motion for relief from the automatic stay is important to creditors and other parties alike that can ask a Bankruptcy Judge to grant a lift of the automatic stay to allow a lawsuit to proceed. While this is typically left to the discretion of the Bankruptcy Judge, many will request it in the event that the lawsuit against you won’t affect your bankruptcy case. A creditor is likely to file a motion to lift the automatic stay if they believe that the debt isn’t dischargeable due to fraud, or if you aren’t planning to reaffirm a contract to cover debt from an automobile loan. A mortgage company who stands to lose money if forced to wait until your bankruptcy is over to foreclose may also file this type of request.

If you are facing a lawsuit, contact our Rocklin bankruptcy office for help. We can answer your questions and guide you to a solution.

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Sacramento, CA 95814

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Phone: 916 459 2364

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