Can You File Bankruptcy While Being Sued? Here's What Stops

Debt collectors file roughly 3 million lawsuits each year in the United States. If you've been served with a lawsuit—or already have a judgment against you,you might wonder if bankruptcy can stop the bleeding.

The short answer: yes, in most cases. Bankruptcy triggers an automatic stay that pauses active lawsuits and stops creditors from garnishing your wages or seizing your bank account. You can file even after a judgment has been entered, including default judgments where you never responded to the lawsuit. The debt that led to the lawsuit can often be wiped out completely.

But not every lawsuit stops with bankruptcy. Child support cases, paternity proceedings, and certain fraud claims keep moving forward. Understanding which lawsuits bankruptcy can stop,and which it can't,helps you make the right move.

Which Lawsuits Does Bankruptcy Stop?

When you file bankruptcy, federal law imposes an automatic stay. This legal shield halts most collection activity the moment your case is filed. Courts must stop processing debt-related lawsuits. Creditors must stop calling. Wage garnishments cease immediately.

Bankruptcy stops these types of lawsuits:

• Credit card debt lawsuits – The most common type of lawsuit that bankruptcy stops
• Medical debt collection suits – Hospital and doctor lawsuits pause immediately
• Personal loan lawsuits – Including payday loans and unsecured bank loans
• Deficiency lawsuits after repossession – When you owe money after a car is repossessed
• Debt buyer lawsuits – Cases filed by companies that purchased old debt for pennies on the dollar
• Utility disconnection actions – Lawsuits to shut off power, water, or gas for nonpayment
• Foreclosure proceedings – At least temporarily while you explore options
• Some eviction cases – If the eviction is for nonpayment and no final order exists yet

The automatic stay applies whether you file Chapter 7 or Chapter 13. The protection starts the day you file, not weeks later when a judge reviews your case.

Collection Actions That Stop Immediately

Bankruptcy doesn't just stop lawsuits. It also stops these related collection actions:

• Wage garnishment – Your employer must stop withholding money from your paycheck
• Bank account levies – Creditors cannot freeze or drain your bank account
• Property liens – New liens cannot be placed on your property (though existing liens remain)
• Harassing phone calls – Debt collectors must stop contacting you entirely

If a creditor already won a judgment before you filed, bankruptcy can still eliminate the debt. Judgments do not survive discharge in Chapter 7 for most unsecured debts.

Can You File Bankruptcy After a Judgment?

Yes. You can file bankruptcy to get rid of judgment debt, including default judgments.

A default judgment happens when you don't respond to the lawsuit or show up in court, and the creditor automatically wins. Many people assume that once a judgment is entered, it's too late to do anything. That's not true. Bankruptcy treats judgment debt the same as the original debt,if the underlying debt is dischargeable, the judgment is too.

Once you file, bankruptcy stops the creditor from using that judgment to garnish your wages, levy your bank account, or place new liens on your property. If wage garnishment has already started, it stops immediately. Your employer receives notice and must cease withholding funds.

Start your free Chapter 7 filing now at talkaboutdebt.ai/file-bankruptcy and stop judgment creditors from collecting.

Which Lawsuits Keep Moving Forward?

The automatic stay is powerful, but it's not absolute. Some lawsuits are specifically excluded from the stay under federal bankruptcy law.

Bankruptcy does not stop these types of cases:

• Child support and alimony proceedings – Cases to establish, modify, or collect support continue
• Paternity proceedings – Actions to establish parentage are not affected
• Child custody and visitation matters – Family court cases proceed normally
• Criminal cases – Bankruptcy has no effect on criminal prosecutions
• Domestic violence restraining orders – Protective order proceedings continue
• Tax audits and assessments – The IRS can continue examining returns and issuing notices

if a lawsuit involves fraud, willful injury, or other bad acts, the creditor may file a motion in bankruptcy court to have that specific debt declared nondischargeable. If the court agrees, that debt survives bankruptcy even if the lawsuit itself was paused.

Does Bankruptcy Stop Foreclosure and Eviction?

Bankruptcy can temporarily stop foreclosure and eviction lawsuits, but the protection is often short-lived without additional action.

Foreclosure

When you file bankruptcy, the automatic stay immediately halts foreclosure proceedings. If a foreclosure sale was scheduled for next week, it cannot go forward. But this pause is not permanent.

In Chapter 7, the lender can ask the court to lift the stay, which judges typically grant within a few weeks. Chapter 7 does not provide a mechanism to catch up on missed mortgage payments. If you're behind, you'll likely lose the home eventually unless you negotiate directly with the lender.

Chapter 13 offers more protection. You can propose a repayment plan that spreads your past-due mortgage payments over three to five years while keeping current on new payments. If you complete the plan, you keep your home. The lender cannot foreclose during the plan period as long as you stay current.

Eviction

The automatic stay stops eviction lawsuits only if the landlord has not yet obtained a judgment for possession. If you file before the court issues an eviction order, the case pauses. If the landlord already has a judgment, they can usually continue with the eviction after filing a simple motion with the bankruptcy court.

Even if the stay temporarily stops the eviction, landlords can request the court lift it, especially if the eviction is based on lease violations like property damage or illegal activity,not just nonpayment of rent.

Bankruptcy is not a tool to stay in a rental property long-term if you cannot pay rent. It buys time, sometimes a few weeks, to move or negotiate. For homeowners facing foreclosure, Chapter 13 offers real protection. For renters, the benefit is limited.

Does Bankruptcy Clear Lawsuit Debt?

Generally, yes. As long as the underlying debt is dischargeable, the lawsuit debt is dischargeable as well.

If you were sued for an unpaid credit card bill and the creditor won a $15,000 judgment against you, filing Chapter 7 wipes out that debt entirely. The judgment disappears. The creditor cannot collect, garnish, or sue you again for the same debt. The same applies to medical bills, personal loans, and most other unsecured debts.

One major exception: fraud. If the lawsuit was based on a claim that you intentionally deceived someone or committed fraud, the creditor can challenge the discharge in bankruptcy court. They must file an adversary proceeding,a lawsuit within your bankruptcy case,arguing that the debt should survive. If they prove fraud by clear and convincing evidence, the debt remains even after your bankruptcy discharge.

Other nondischargeable debts include recent tax debt, student loans (in most cases), court-ordered restitution, and debts arising from willful injury to another person or property. If the lawsuit involves any of these, bankruptcy will pause the case but won't eliminate the debt.

For standard consumer debt lawsuits,credit cards, medical bills, personal loans,bankruptcy clears the debt permanently.

What Happens If You're Sued While in Bankruptcy?

Once you file bankruptcy, creditors are barred from starting new lawsuits related to debts that existed before the filing date. If a creditor sues you anyway, they violate the automatic stay. You can report the violation to your bankruptcy trustee or the court, and the creditor may face sanctions, including fines and paying your attorney fees.

If a lawsuit is filed for a debt that arose after your bankruptcy filing, the automatic stay does not apply. For example, if you file bankruptcy in March and rack up new credit card debt in April, that new debt is not protected. The creditor can sue you for it.

How to Stop a Lawsuit With Bankruptcy

If you're being sued and considering bankruptcy, speed matters. The automatic stay takes effect the moment you file. That means if you file today, the lawsuit pauses today. Wage garnishment stops with your next paycheck.

Here's what you need to do:

1. Gather your lawsuit documents. Locate the summons, complaint, and any court notices. You'll need the case number and creditor's name for your bankruptcy paperwork.
2. Check your eligibility. Use our free Chapter 7 eligibility screener to see if you qualify based on income and expenses.
3. Complete your bankruptcy forms. Our AI-powered filing assistant, Zero, guides you through every question. You can import your credit report automatically to list all debts.
4. File your case. Once filed, the court clerk issues your case number. You must notify the creditor suing you by providing your case number and filing date.
5. Notify the creditor and court. Send a copy of your bankruptcy notice to the creditor's attorney and the court handling the lawsuit. They must stop the case immediately.

If a wage garnishment has already started, notify your employer's payroll department as soon as you receive your case number. Provide them with written notice of your filing. Garnishment must stop, usually within one pay period.

Can Creditors Resume the Lawsuit After Bankruptcy?

It depends on the outcome of your bankruptcy.

If you receive a discharge and the debt is discharged, the lawsuit is over. The creditor cannot resume it, refile it, or pursue the debt in any way. The discharge is a permanent injunction.

If your bankruptcy case is dismissed before discharge,perhaps you failed to complete required paperwork or didn't attend the creditors' meeting,the automatic stay ends. Creditors can resume lawsuits and collection activity immediately. If you file bankruptcy multiple times within a year, the automatic stay may be shortened or eliminated entirely, allowing lawsuits to continue even during your case.

If a creditor successfully argues that a debt is nondischargeable (fraud, willful injury), they can resume or restart the lawsuit after your bankruptcy closes.

For most filers with standard consumer debt, discharge ends the lawsuit permanently.

Should You File Bankruptcy If You're Being Sued?

Bankruptcy is not the right move for everyone, but if you're facing a lawsuit for debt you cannot pay, it's often the most effective tool available.

Consider bankruptcy if:

• You owe more than you can realistically pay off in three to five years
• A creditor has already obtained a judgment and is garnishing your wages
• You're being sued by multiple creditors at once
• Debt is preventing you from covering basic living expenses
• You have little or no assets that creditors can seize

Do not file bankruptcy solely to delay a lawsuit. If you have the income to settle or pay the debt, settling is often faster and less disruptive. If the lawsuit involves a small amount,say, under $2,000,and you have no other debt, bankruptcy may not be worth the impact on your credit.

But if you're drowning in debt and a lawsuit is just one more problem on a long list, bankruptcy offers immediate relief and a clear path to eliminating the debt for good.

Check your eligibility now at talkaboutdebt.ai/file-bankruptcy/screener,it takes two minutes, and there's no cost to prepare your filing.

This article is for educational purposes only and does not constitute financial or legal advice. Bankruptcy law is complex and varies by state. Consult a licensed attorney for guidance on your specific situation, especially if facing a lawsuit involving fraud or other nondischargeable claims.