Can I File for Bankruptcy After a Lawsuit?

Can You File Bankruptcy if You’ve Already Been Sued for a Debt?

Yes, many people successfully file bankruptcy after being sued for a debt. As soon as you file your case, you get protection in the form of the automatic stay. This stops almost all collection activity, including debt lawsuits, wage garnishment, and bank levies. 

If you don’t file bankruptcy, your options are pretty much limited to fighting the lawsuit, paying off the debt in full to stop the lawsuit, or trying to negotiate with the creditor or debt collector to settle the debt.

Does Filing Bankruptcy Stop All Civil Lawsuits?

No, filing bankruptcy can stop a debt lawsuit, but some types of lawsuits will continue, including: 

• Proceedings to establish paternity

• Proceedings to establish or modify child support or alimony

• Child custody and visitation matters

Filing bankruptcy also doesn’t stop criminal cases from moving forward. 

How Does a Bankruptcy Filing Impact Foreclosure and Eviction Lawsuits?

If you’re facing a foreclosure or eviction lawsuit, filing bankruptcy can provide some immediate relief, but it’s important to understand what it can and can’t do. 

As mentioned, when you file for bankruptcy, an automatic stay goes into effect. This temporarily stops most collection actions, including foreclosure and eviction proceedings. This pause can give you some breathing room to figure out your next steps, but it’s not a long-term fix. 

For example, in a foreclosure, the lender may be able to resume the process after the bankruptcy case is resolved, unless you’ve caught up on missed payments or worked out a deal. Similarly, in eviction cases, landlords can often ask the court to lift the automatic stay if the eviction is due to non-payment or a lease violation.

To learn more, check out these articles in our Learning Center: 

• Can Bankruptcy Stop Foreclosure? 

• Can Bankruptcy Stop Eviction? 

Should I Fight the Debt Collection Lawsuit or File Bankruptcy? 

Fighting a debt collection lawsuit can be a good option in some cases, especially if you don’t actually owe the debt or the debt collector can’t prove you do. Read the court summons and complaint paperwork carefully to see where you stand. If you respond to the lawsuit and show up in court, you might even win if the creditor doesn’t have the proper paperwork. 

If you're worried about responding on your own but can't afford a lawyer, you can draft an answer letter for a small fee using SoloSuit. They've helped 234,000 people respond to debt lawsuits, and they have a 100% money-back guarantee.

But this only helps with that one debt. If you’re juggling other unpaid bills, lawsuits, or collection calls, filing for bankruptcy might be your best bet to tackle everything at once. Bankruptcy doesn’t just stop one lawsuit — it puts an immediate stop to all collection actions, including calls, wage garnishments, and new lawsuits. 

It also wipes out most unsecured debts, like credit cards and medical bills, giving you a clean slate. While defending a single lawsuit might work for some, bankruptcy can be a stronger option if you’re dealing with more than just one debt or need relief from constant financial stress.

Can You File Bankruptcy After Losing a Lawsuit? 

Yes, even if you’ve already lost in a debt lawsuit, you can file bankruptcy and stop any collection actions associated with the case. If you lose in court, the creditor can get a court judgment to garnish your wages or bank account or put a lien on your property. If any of this has happened, you may be able to reverse it by filing Chapter 7 or Chapter 13 bankruptcy.

This also works if a default judgment has been entered. A default judgment is something the court issues if you don’t show up to fight the case.

Does Bankruptcy Stop Wage Garnishment?

Yes. If a creditor or debt collector wins a debt collection lawsuit, it won't take them long to ask the court for permission to garnish your wages. You can stop this before it starts by filing bankruptcy.

If the garnishment has already started, bankruptcy law stops it and protects your future wages. 

Can Bankruptcy Clear Lawsuit Debt?

Generally speaking, yes. As long as the underlying debt is dischargeable, the lawsuit debt is dischargeable as well. For example, if you were sued for an unpaid credit card bill and the creditor won a judgment against you, filing for bankruptcy can typically wipe out that debt, including the judgment. 

That said, if the debt you were sued over is not dischargeable — such as recent tax debt or court-ordered child support — bankruptcy won’t change that. The nature of the debt remains the same.

One exception is lawsuits for fraud. If the lawsuit was based on a claim of fraud or other bad acts, the lawsuit debt may not be dischargeable in bankruptcy. If you’re facing a fraud lawsuit, it's a good idea to talk to an experienced bankruptcy lawyer who can help you figure out your best options. Upsolve can help set up a free consultation with an experienced bankruptcy attorney near you.

What’s a Judgment Lien and Why Should I Care?

A judgment is a court order that says you owe money to someone, and it can lead to a judgment lien. A judgment lien lets the creditor claim part of the value of your property, like your home, if you sell it. State laws decide how and when this can happen, but this matters because a lien can make it harder to sell or refinance your home. 

More importantly, it also changes the nature of your debt, turning unsecured debt like credit card bills into secured debt tied to your property. The good news is that in many bankruptcy cases, if the only property you own is protected by exemptions, the bankruptcy court can remove the lien, giving you some relief. If the property isn’t fully covered by exemptions, the lien stays in place. The creditor could still claim part of the property’s value if it’s sold during or after the bankruptcy. 

Learn more in our article Does Bankruptcy Clear Judgments?

What Happens if I Sue Someone Before I File Bankruptcy?

If you have a lawsuit pending against someone else, the lawsuit is considered an asset of your bankruptcy estate. In other words, if you’re suing someone and could win money or property, that potential payout becomes part of what the bankruptcy court can use to pay your debts. 

This most commonly happens with personal injury cases. If you’re involved in a personal injury lawsuit, the bankruptcy trustee handling your Chapter 7 bankruptcy will take it over.

The federal bankruptcy exemptions, and some state exemptions, protect personal injury claims up to a certain amount. If you’re in an opt-out state and required to use your state’s exemptions during bankruptcy, it’s often recommended that you speak to a bankruptcy attorney. They’ll be able to explain how bankruptcy law will affect your case. This is especially important if you have ongoing medical bills you’re hoping to pay with money from the lawsuit.

What Happens if You Sue Someone and They File Bankruptcy?

If you sue someone and they file for bankruptcy, your lawsuit will typically stop because of their automatic stay. This legal protection freezes most collection actions, including lawsuits, as soon as the bankruptcy is filed. Ignoring the stay and continuing your lawsuit can lead to penalties from the bankruptcy court, so it’s important to stop your case immediately.

There are some exceptions to the automatic stay. For example, lawsuits related to child support or other family court matters aren’t affected by the stay and can move forward. If your case doesn’t fall into one of these exceptions, you’ll need to wait for the bankruptcy process to play out or seek permission from the bankruptcy court to continue your case.

Let’s Summarize...

If you’ve been sued by a creditor because you can’t pay your debts, filing bankruptcy will stop the lawsuit. You can also file bankruptcy after you’ve already lost the lawsuit and a judgment has been entered against you.

If you qualify for Chapter 7 bankruptcy, Upsolve may be able to help you file your case for free using our online tool. Upsolve has helped thousands of people discharge almost $700 million in debt. If you want or need legal guidance, you can set up a free consultation with a bankruptcy attorney in your area.