Being served with a lawsuit can be overwhelming, especially when you are already struggling with debt. Whether the lawsuit involves credit card debt, medical bills, personal loans, or another financial obligation, many people wonder whether bankruptcy can stop the case from moving forward. In many situations, filing for bankruptcy can temporarily halt collection lawsuits and provide immediate relief through a legal protection known as the automatic stay. However, the protection you are granted depends on a variety of factors. If you’re wondering whether you can file for bankruptcy to stop a lawsuit against you, continue reading and consult with a knowledgeable Jefferson County, Kentucky bankruptcy lawyer today.
Can I File for Bankruptcy to Stop a Lawsuit Against Me?
Yes, filing for bankruptcy can be an effective way to halt many lawsuits. When you file, a legal protection known as the “automatic stay” immediately goes into effect under Section 362 of the U.S. Bankruptcy Code.
What is the Automatic Stay?
The automatic stay is a federal legal protection that automatically takes effect when a bankruptcy case is filed, preventing creditors from continuing most collection efforts, including pending lawsuits related to dischargeable debts like credit cards, medical bills, and personal loans. In addition to lawsuits, it also stops actions like wage garnishments, repossessions, and harassment from collectors, providing you with immediate relief.
Are There Lawsuits that Bankruptcy Will Not Stop?
While the automatic stay is a powerful tool, it does not act as a permanent shield against all legal actions. Certain lawsuits and proceedings are exempt from the stay, meaning they can continue even after you file for bankruptcy.
Generally, legal actions unrelated to debt collection or those deemed essential by law will proceed regardless of your filing. The most notable exceptions include:
- Criminal proceedings: Bankruptcy is not a way to halt criminal trials or enforcement actions.
- Domestic support obligations: Legal proceedings to establish paternity, determine custody, or modify alimony and child support orders typically continue. Additionally, while the stay might
- temporarily pause some collection methods, specific enforcement actions like wage garnishments for support arrears often continue.
- Tax proceedings: Certain audits or actions by tax authorities may remain unaffected.
- Police or regulatory power: Legal actions brought by a governmental unit to enforce its police or regulatory power are often exempt.
Can a Creditor Request to Lift the Automatic Stay?
Yes, a creditor can request that the bankruptcy court “lift the stay” if they can demonstrate a valid legal justification, such as a lack of adequate protection for collateral. Because these exceptions are nuanced and vary by jurisdiction, it is critical to speak with a qualified bankruptcy attorney to determine if your specific lawsuit is protected.
