Filing for bankruptcy stops most civil lawsuits against you because of an automatic stay which goes into effect immediately when your bankruptcy is filed. This stay prevents your creditors from continuing their collection actions, including lawsuits against you.
How Does Bankruptcy Stop A Lawsuit? The Automatic Stay
Many people ask us if filing a NJ bankruptcy can stop a civil lawsuit which has been filed against them. In most cases, the answer is YES!
This happens because of the “automatic stay” that takes place automatically the instant the bankruptcy is filed. This stay goes into effect in a Chapter 7, Chapter 13, or Chapter 11 bankruptcy.
The automatic stay stops creditors from continuing their collection actions against you. This includes stopping their attempts to get a money judgment in a civil lawsuit pending against you. That means that the party who brought the lawsuit, called the Plaintiff, must stop all court proceedings. If the lawsuit is scheduled for trial, the trial is cancelled. If the lawsuit is in the discovery phase, where parties are being deposed or interrogatories are pending, all discovery stops. The bankruptcy will stop the Plaintiff Creditor from getting a judgment against you in the case. For more information on the automatic stay read our blog Stop Your Creditors Cold With an Automatic Stay.
If you have a lawsuit pending against you when you file bankruptcy, we can file a Suggestion of Bankruptcy in the case to ensure that the Civil Court and all the parties to the litigation receive notice of your NJ bankruptcy filing.
If a creditor ignores and willfully violates the stay by continuing collection activities, you may be entitled to recover actual damages and your attorneys’ fees. In some cases of extreme violations, the court may award punitive damages.
After your bankruptcy case is over, and you receive your discharge, you will not owe the money that the creditor was suing you to get back.
What Types Of Lawsuits Does Bankruptcy Stop?
Some of the most common types of lawsuits that filing a NJ bankruptcy can stop include:
- Unpaid credit card balance
- Compensation for a personal injury case
- Money sought for breach of contract
- Lawsuits for medical debt
What Types Of Lawsuits Will Not Be Stopped By Filing Bankruptcy?
A few types of lawsuits are not stopped by filing a bankruptcy. These include:
- Criminal cases
- Divorce actions
- Child Custody and support cases
In rare cases, such as where the Debtor has committed fraud or embezzlement, a Creditor might attempt to pursue a claim against the Debtor in the bankruptcy case. In other words, the creditor is seeking to obtain an order declaring that the debt owed to them cannot be discharged or eliminated in the bankruptcy because of the fraud or embezzlement. Most creditors do not spend the time or the money to pursue this type of claim, especially, if it is unlikely they will be able to get back all the money owed.
Contact Us Now To Learn How a NJ Bankruptcy Can Stop A Lawsuit Against You
If you have collection lawsuits pending against you and you want to learn how you can stop them by filing a NJ bankruptcy contact our NJ bankruptcy attorneys online by filling out the form or by calling 973-323-2953 to schedule a free consultation with an attorney at Levitt & Slafkes, P.C.
We are here to help you!
We are proudly designated as a debt relief agency by an Act of Congress. We have proudly assisted consumers in filing for Bankruptcy Relief for over 30 years. The information in this blog is for general information purposes only. Nothing should be taken as legal advice for any individual case or situation.