Can You Be Sued After You File For Bankruptcy?

One of the benefits of declaring bankruptcy is that an automatic stay is issued, prohibiting creditors from coming after you for debt collection. Under the terms of the stay, many creditors cannot initiate litigation against you. Foreclosures and any pending lawsuits from creditors are paused as are previous lawsuit judgments requiring you to resolve unpaid debts for medical bills, credit card bills, unpaid rent or personal loans.

However, the automatic stay does not serve as a catch-all to prevent you from being sued civilly. Some debts are considered nondischargeable and the people or businesses to which you owe such debts are not bound by the stay. Types of nondischargeable debts include alimony and child support payments, federal taxes, criminal restitution and money owed to plaintiff(s) harmed in drunken driving accidents or other incidents in which the defendant was intoxicated. Any debts accrued after a person files for bankruptcy, whether dischargeable or nondischargeable, are fair game for litigation.

It is also possible for a creditor to petition the court to have a debtor’s automatic stay lifted. If the stay would result in financial harm to a creditor, or if lifting the stay would allow for courts to decide on a matter that is crucial to the resolution of the bankruptcy case (i.e. whether fraud occurred), a judge may give the go-ahead.

The automatic stay will not be lifted for legal dispute having nothing to do with debt — for example, if you are sued for a property line issue or if your business is sued for discrimination. You remain responsible for behaving in accordance with the law and can be held accountable for neglecting your responsibilities.

Dealing with bankruptcy is stressful in itself and trying to handle a lawsuit on top of it can seem nearly impossible. For guidance on how filing for bankruptcy may affect a separate legal suit pertaining to your past actions, get in touch with an informed and reliable counselor. At the Law Offices of James C. Zimmermann, we take the time to explain your options and the pros and cons offered by each. Call us at 973-764-1633 or contact us online. We have offices conveniently located in Hackensack, Vernon, Wayne, Pompton Lakes and Nutley, New Jersey.