Can You Sue Someone Who Has Filed Chapter 7 Bankruptcy?

Someone owes you money but filed Chapter 7 bankruptcy. Can you still sue them? Or maybe you filed bankruptcy and creditors won’t stop calling. You need to understand your rights and what actions are still possible.

Filing Chapter 7 bankruptcy discharges most debts for the debtor. Yet some creditors attempt to collect even after bankruptcy filing. Whether collection is legal depends on the debt type and timing.

Bankruptcy Creates an Automatic Stay

Chapter 7 bankruptcy triggers an automatic stay immediately. Courts stop creditors from filing lawsuits against the debtor. Creditors cannot call, send bills, or make collection attempts. The stay protects debtors from harassment during bankruptcy proceedings.

The automatic stay only applies to dischargeable debts. These include:

• Personal loans
• Credit card balances
• Medical bills
• Unpaid rent
• Car loans
• Mortgage foreclosure
• Utility bills
• Business debts
• Accident-related debts (except those causing death or injury)

Debtors can choose to pay discharged debts voluntarily. Some pay because family members co-signed or to protect important relationships. Nothing legally requires payment after discharge, though.

When Creditors Can Still Sue After Bankruptcy

Creditors sometimes collect debt even after an automatic stay. They must obtain an exemption from the bankruptcy court. The creditor proves the automatic stay harms their legal claim or property rights.

Courts may grant exemptions to secured creditors, cosigners, or lessors. Two main reasons exist for granting relief: lack of equity and for cause.

Relief for Cause

Creditors claiming relief for cause must demonstrate specific circumstances:

• The automatic stay doesn’t protect them adequately
• Property values are declining rapidly
• The stay creates an unfair burden
• The lawsuit is unrelated to bankruptcy
• The debtor failed bankruptcy duties or delays payment

Relief for Lack of Equity

Creditors prove the debtor’s property has little or no value. They argue their interest shouldn’t be subject to the stay. Courts can lift the stay entirely or modify it case by case.

Nondischargeable Debts Allow Lawsuits

Certain debts cannot be discharged through Chapter 7 bankruptcy. Creditors can sue for these debts regardless of bankruptcy status. Nondischargeable debts include:

• Tax debt
• Student loans
• Unscheduled debts not listed on bankruptcy petition
• Court penalties and fines
• Child or spousal support
• Cooperative housing fees or condominium debts
• Attorney fees related to child custody

Need help with debt collection lawsuits? Speak with a bankruptcy attorney for free to understand your options.

Special Cases Where Bankruptcy Doesn’t Stop Lawsuits

Automatic stays don’t protect debtors from certain lawsuit types. Courts allow these proceedings regardless of bankruptcy filing.

Fraud-Related Debts

Debts from fraudulent activities cannot be discharged. Creditors file lawsuits by applying for an exemption. Courts must determine fraud occurred before allowing the lawsuit to proceed.

Personal Injury Cases

Driving while intoxicated that causes death or injury creates nondischargeable debt. Bankruptcy courts allow victims to file lawsuits. Courts determine whether the debtor was intoxicated at the time.

Criminal Prosecution

Filing bankruptcy doesn’t halt criminal cases. Criminal proceedings continue regardless of bankruptcy status.

Family Law Matters

Child custody and divorce proceedings aren’t affected by bankruptcy. Restraining orders and peace bonds also continue without interruption.

Recent Debts

Loans obtained within three months of filing bankruptcy may not discharge. Accidents causing property damage within two months of filing also create nondischargeable debts.

Handling Ongoing Lawsuits During Bankruptcy

Pending lawsuits when bankruptcy is filed create unique situations. For non-dischargeable debt cases, parties have three options:

• Move the case to bankruptcy court
• Dismiss the case entirely
• Request permission from bankruptcy court to continue

If bankruptcy was filed before the lawsuit, parties can file an adversary proceeding. Adversary proceedings occur within bankruptcy court. They require permission from the bankruptcy judge to proceed.

Adversary Proceedings Purposes

Creditors and other parties use adversary proceedings to:

• Determine extent, validity, or priority of liens
• Establish dischargeability of specific debts
• Recover property or money from third parties
• Object to or revoke the debtor’s discharge
• Request injunctions from the judge
• Decide if matters should move to another court
• Seek declaratory judgments

What to Do If Sued After Filing Bankruptcy

Nondischargeable debt creditors serve you with a complaint. The complaint explains why the creditor should receive an exemption. Federal Rules of Bankruptcy Procedure govern service to your bankruptcy petition address.

A summons accompanies the complaint. The summons outlines response deadlines and required court appearances. You have specific timeframes to respond or risk default judgment.

Responding to the Complaint

Two response options exist: file an answer or file to dismiss. Most debtors without attorneys file an answer because dismissal motions are complex. Filing an answer addresses each complaint allegation individually.

After filing, you appear in court for a status conference. Status conferences are brief and introduce the judge to your case. The judge sets hearing dates for subsequent appearances. Come prepared with documentation and evidence.

Understanding bankruptcy protections helps you navigate creditor actions. Chapter 7 discharges most debts, but creditors retain rights for nondischargeable debts. Know which category your debt falls into before responding.