There is no quick and easy answer to this question. Generally, if the lawsuit involves money or property, it will be temporarily suspended or dismissed. If it is primarily concerned with something else (child custody, for instance), it will not have any effect. When you file for bankruptcy, the bankruptcy court will enter an automatic stay. This injunction means that as soon as any other court learns of the bankruptcy proceeding, it must act accordingly. Usually, lawsuits that involve money or property are immediately suspended, with the possibility of dismissal if the bankruptcy goes through to completion. This is an extremely complicated area of law, however, and it is imperative that you have the advice of bankruptcy experts, like those at Burr Law.
Pending Money/Property Lawsuits
This lawsuit would overlap with the jurisdiction of the bankruptcy court, so typically, the automatic stay will stop the debt collection lawsuit. Your attorney would file a “Suggestion of Bankruptcy.” This lets the judge know that a bankruptcy case is pending, and the entire lawsuit is suspended, at least until the bankruptcy court enters a discharge. When that happens, the court in the collection suit usually dismisses the case since it will be dealt with in the bankruptcy court. However, this course of action is not guaranteed. Though bankruptcy courts issue an injunction that suspends a pending case that has to do with money or property, it may be determined that having another court continue the case would be more efficient. In that situation the bankruptcy court would allow the case to go forward.
Likewise, if a creditor wants to begin a lawsuit against you after you have filed bankruptcy, it is possible, though difficult, to do. The creditor can request that the automatic stay be lifted in that particular instance, and it would be up to the bankruptcy judge to decide.
Divorce and Child Custody
Generally, divorce or child custody cases that are in current litigation will not be affected by a bankruptcy action. A number of family court judges will put the case on hold as a courtesy until they get an order from the bankruptcy judge. Bankruptcy courts don’t want to have anything to do with these kinds of family law matters.
Alimony and Child Support
With alimony and child support, the relevance of bankruptcy is apparent. The family court’s imposition of child support or alimony orders could affect a bankruptcy case because of the effect on the debtor’s resources. This is true when the person declaring bankruptcy is the one also paying alimony and/or child support as well as when the person declaring bankruptcy is the one receiving alimony. A bankruptcy court may reserve jurisdiction over a property settlement but even then, bankruptcy courts rarely take issue with a property settlement unless it is extreme.
If you are behind on your alimony payments and legal action has actually begun to collect them, the bankruptcy injunction will suspend that activity. However these are not debts that are dischargeable under either Chapter 13 or Chapter 7 bankruptcy. This can also be the case for many property settlement agreements. Consultation with the professionals at Burr Law can help clarify your position.
A child support creditor (a state agency or the other parent) is subject to the automatic stay just like any other creditor. However, any debts you owe for child support will not be discharged in the bankruptcy case. The creditor can renew collection activities after the bankruptcy court enters the discharge.
There are other kinds of lawsuits where the intricacies of the particular situation mean that bankruptcy might have an affect on them. These lawsuits include: criminal cases, code enforcement and nuisance actions, evictions, and administrative actions. Ask the expert bankruptcy attorneys at Burr Law for help if you are considering bankruptcy.