Can I Sue Someone Who Has Filed for Bankruptcy?

When someone breaks a contract or injures you somehow, you can file a lawsuit asking for money to reimburse your loss. But, you might be out of luck if the person you want to sue files for bankruptcy. Whether you can sue will depend on the type of issue involved and the date of the incident.

Bankruptcy Stops Most Lawsuits

When someone files a bankruptcy case, a court order called the automatic stay immediately goes into effect. 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. The stay's power includes stopping many types of lawsuits cold.

But the automatic stay has limitations. It only ends litigation involving debts that can be forgiven (discharged) in the bankruptcy case. Other types of court proceedings can continue to move forward.

Prohibited Lawsuits

You won't be able to file or continue with a lawsuit if the damage occurred before the bankruptcy filing and relates to one of the debts 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 mortgage foreclosure.

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

Allowed Lawsuits

The automatic stay doesn't prevent you from filing or continuing with all court proceedings. For instance, some court cases:

• don't involve debts
• concern nondischargeable debts, or
• involve a legal right that won't arise until after the bankruptcy filing.

Below you'll find examples of obligations that fall into each category.

Actions not related to the debtor's debts or property:

• Criminal prosecutions. Filing for bankruptcy won't stop a criminal case.
• Divorce and child custody. Child custody matters will not be directly affected by a bankruptcy. The same is true for restraining orders. 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 also involved in the bankruptcy case.

Lawsuits involving debt that won't be discharged in the bankruptcy:

• Fraud. If you're a victim of fraud and bring a lawsuit for relief, 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 if the bankruptcy court or a state court determines the debt arose from fraud. Learn about bankruptcy trials or "adversary proceedings."
• Some personal injury cases. The bankruptcy won't discharge a debt if the debtor caused death or injury while intoxicated. The bankruptcy court will usually allow this type of lawsuit to continue or be filed to determine if the debtor was intoxicated.

Debt that arises after the bankruptcy filing:

A bankruptcy will only involve debt that existed before the bankruptcy filing date. An incident that arises afterward won't be included in the bankruptcy.

• Car accident. If the debtor caused an accident that totaled your car two months after the debtor filed a bankruptcy case, you'd be able to sue.
• New debt. If the debtor asked you for a loan three months after filing for bankruptcy but failed to pay it back, you'd be able to pursue your legal remedies.

You can file a lawsuit in both of these cases because the incident occurred after the debtor filed the bankruptcy case.

Bankruptcy and State Court Lawsuits

If the lawsuit was already pending when the debtor filed the bankruptcy case—and it involves an issue other than a debt that will be discharged—the parties can choose how to proceed. They can:

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

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

• file an "adversary proceeding, which is 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 obtaining permission from the bankruptcy court.

Learn more by reading about the types of bankruptcy cases you must file as an adversary proceeding.

Meet With a Bankruptcy Lawyer

Before deciding to sue someone who has filed for bankruptcy, consider consulting with a bankruptcy attorney specializing in litigation. After reviewing your case, a bankruptcy lawyer will explain the likelihood of prevailing and help you develop an effective litigation strategy if you decide to go forward.

Need More Bankruptcy Help?

Did you know Nolo has been making the law easy for over fifty years? It's true—and we want to make sure you find what you need. Below you'll find more articles explaining how bankruptcy works. And don't forget that our bankruptcy homepage is the best place to start if you have other questions!

We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.