What happens to a lawsuit if I file for bankruptcy?

The lawsuit in bankruptcy means that it’s immediately stops. In other words, filing bankruptcy and listing the creditor suing in your bankruptcy petition ensures that the lawsuit process is halted. Personal bankruptcy has two options. Chapter 13 allows you to pay creditors the money you owe them in three to five years. You receive a repayment plan that has the specific monthly amount you pay to a bankruptcy trustee and how many months you pay. Chapter 7 is the second option. It allows you to get rid of most of your unsecured debts like medical or credit card bills. However, chapter 7 doesn’t help you against unsecured debts such as child support, alimony, student loans and taxes. With chapter 7, your unsecured debts are wiped out.

Both chapter 13 and chapter 7 comes with an automatic stay. The automatic stay is a legal protection you have from creditors. The protection starts at the time your bankruptcy petition is filed to the time its discharged (successfully completed) or dismissed.

The automatic stay is vital when you’re facing a lawsuit. For example once your bankruptcy petition is filed, the creditor doesn’t have the option to file or continue the lawsuit. The automatic stay also stops foreclosures and wage garnishments.

Which bankruptcy chapter you’re eligible for depends on a means test. Thus, it’s best to contact a lawyer specializing bankruptcy to make sure you’re eligible for the bankruptcy chapter you want to file.