Can Bankruptcy Stop Pending Lawsuits?

East Tennessee lawyer counsels clients on the scope of an automatic stay

Once your bankruptcy filing is accepted, the court imposes an automatic stay that halts collection actions against you. In most instances, pending lawsuits from creditors will be dismissed as well, but if you are currently engaged in civil or criminal litigation, it’s wise to speak with an experienced bankruptcy attorney about your particular situation. William E. Maddox, Jr. LLC, Attorney at Law in Knoxville works personally with East Tennessee clients to tackle tough debt problems and stop collection lawsuits whenever possible.

Types of claims that are usually stopped when bankruptcy is filed

The automatic stay that is issued at the outset of the bankruptcy process is a powerful measure that not only stops collection actions, but also punitive steps taken by creditors to compel payment, such as the removal of utility services like water or electricity. Along with helping filers overcome their financial challenges, the goal of bankruptcy is to allocate a debtor’s assets fairly among their creditors. If one creditor’s previously filed lawsuit is allowed to continue, that creditor might collect most or all of the debtor’s remaining funds in a judgment, prejudicing other creditors.

Accordingly, numerous types of legal claims where someone seeks payment from a bankruptcy are stopped once the automatic stay is granted. These generally include:

• Actions brought by credit card companies to recover a past due balance
• Lawsuits where monetary damages are sought for a breach of contract
• Partnership disputes where personal assets are at stake
• Personal injury litigation where the bankruptcy filer might be liable for medical bills and other damages
• Home foreclosures and deficiency judgments brought by mortgage lenders when the sale of a property is not sufficient

Even in one of these cases, a creditor might request that the stay be lifted so that their litigation can continue. For example, a case could involve an allegation of fraud related to the bankruptcy, or a creditor could argue that they will suffer financial hardship if their lawsuit is halted. If you’re concerned that a litigation adversary could try to challenge the automatic stay, I will advise you on the merits of their argument and advocate to keep the stay in force.

Criminal and family law actions usually continue despite bankruptcy

Public interest considerations have led lawmakers to exclude certain types of litigation from the automatic stay, even when the result could deplete a debtor’s funds. Fines and attorney’s fees in a criminal case might be very costly, but these matters continue even if the defendant has filed for bankruptcy. Divorces and other family law cases also go on despite the automatic stay, including financial disputes over back child support. Whatever your particular situation entails, taking the time to discuss your options with a qualified bankruptcy attorney will help you to protect your interests and plan for what’s ahead.

Contact a skillful Tennessee bankruptcy lawyer for a free consultation

William E. Maddox, Jr. LLC, Attorney at Law advocates for East Tennessee clients in bankruptcy proceedings and related matters. Please call 865-293-4953 or contact me online to schedule a free initial consultation regarding your issue. My office is in Knoxville.