Can I Sue Someone Who Has Filed for Bankruptcy?

Find out how bankruptcy can get in the way of a lawsuit.

When someone breaks a contract or injures you in some way, you can file a lawsuit asking for money to reimburse you for your loss. But you might be out of luck if the person you want to sue files for bankruptcy. Your ability to move forward will depend on the type of issue you have with the debtor (the person who files a bankruptcy case) and when the incident occurred.

Bankruptcy Stops Most Lawsuits

When someone files a bankruptcy case, an injunction (a type of court order) called the automatic stay is activated immediately. The stay stops a creditor’s attempt to collect a debt from the debtor. For instance, a creditor must stop calling the debtor, as well as sending bills—it will even stop a lawsuit in its tracks.

But the automatic stay has limitations. It will only put an end to litigation involving debts that can be forgiven (discharged) in the bankruptcy. Some other types of court proceedings can continue.

Prohibited Lawsuits

You won’t be able to continue a lawsuit (or file one) if the debt was owed before the bankruptcy filing and the amount owed relates to one of the debts on the list below:

  • credit card balances
  • personal loans
  • most business debts
  • debt arising from an accident (except for those that result in bodily injury or death due to intoxication)
  • medical bills
  • utility bills
  • unpaid rent, or
  • a car loan or a mortgage foreclosure.

(Learn more in Will a Pending Lawsuit Go Away If I File for Bankruptcy?)

Permissible Lawsuits

The automatic stay doesn’t prevent you filing or continuing all court proceedings, however. For instance, some court cases have nothing to do with debts, some deal with debts that aren’t dischargeable in bankruptcy, and some legal rights won’t arise until after the filing of the bankruptcy case. Below you’ll find examples of obligations that fall into each of these categories.

Examples of actions that aren’t related to the debtor’s debts or property:

  • Criminal prosecutions. Filing bankruptcy won’t stop a criminal case.
  • Divorce and child custody. Child custody cases and marriage dissolution matters will not be directly affected by a bankruptcy. The same is true for restraining orders and “peace bonds.” But, when a divorcing couple is ready to divide property, the bankruptcy court might have the jurisdiction to approve the property division when it concerns assets that are also involved in the bankruptcy case.

Examples of lawsuits involving debt that won’t be discharged in the bankruptcy:

  • Fraud. If you’re a victim of fraud and bring a lawsuit to obtain satisfaction, you might be able to file or continue the lawsuit during the bankruptcy case. Many debts that arise from fraud aren’t discharged in bankruptcy, but first, either the bankruptcy court or a state court has to determine if the debt arose from fraud.
  • Personal injury. The bankruptcy will not discharge a debt that arises when the debtor caused death or injury while intoxicated. The bankruptcy court will usually allow this type of lawsuit to continue or to be filed to determine if the debtor was intoxicated.

(To learn more about which debts are excepted from discharge automatically and which debts require a decision from the bankruptcy court, visit Nondischargeable Debts in Chapter 7 Bankruptcy.)

Examples of debt that might not be involved in the bankruptcy matter because it arises after the bankruptcy filing:

  • Car accident. Two months after the debtor filed a bankruptcy case, the debtor caused an accident that totaled your car.
  • New debt. Three months after filing for bankruptcy, the debtor asked you for a loan but failed to pay it back.

In both of these cases, you can file a lawsuit because the incident took place after the debtor filed the bankruptcy case.

Bankruptcy and State Court Lawsuits

If the lawsuit was already pending when the bankruptcy case was filed—and it pertains to an issue other than a debt that will be discharged in the bankruptcy, as discussed above—the parties have the option of choosing how to go forward. They can:

  • dismiss the lawsuit
  • ask the bankruptcy court for permission to continue the state court suit, or
  • move the lawsuit to the bankruptcy court.

If the debtor filed for bankruptcy before the filing of a lawsuit, the parties can:

  • file an adversary proceeding (a lawsuit filed in the bankruptcy court that is related to but separate from the bankruptcy case), or
  • bring the action in another court after first getting permission from the bankruptcy court.

(Learn more by reading What Types of Bankruptcy Cases Must Be Filed as an Adversary Proceeding?)

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