What happens in bankruptcy if I have a potential lawsuit for money?

Written by Attorney Jonathan Petts.  
Updated July 22, 2020

This depends on whether you are suing someone else, or whether someone is suing you.

If someone is suing you for money, there is a good chance that the lawsuit will be delayed or even dismissed once you file bankruptcy. After all -- once your debts are wiped clean by your bankruptcy, you will no longer owe most lenders anything. No debt = no lawsuit. Make sure that you tell the judge and, if possible, the other party's attorney once you file bankruptcy so that the case is handled appropriately.   

If you are suing someone else for money, any money that person is required to pay you (called "damages") can be seized by the trustee. The trustee will probably not take small amounts of damages or larger damages that you are not likely to receive. Regardless, you need to list all pending lawsuits you are involved in, as well as any potential damages you may receive, on your bankruptcy paperwork.

About the author

Attorney Jonathan Petts

Jonathan Petts has over 10 years of experience in bankruptcy and is co-founder and Board Chair of Upsolve. Attorney Petts has an LLM in Bankruptcy from St. John's University, clerked for two federal bankruptcy judges, and worked at two top New York City law firms specializing in... read more