What Happens in Bankruptcy if I Have a Potential Lawsuit for Money?
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This depends: Are you being sued or are you the one suing someone else? If you file bankruptcy a lawsuit against you is stopped. If it's your lawsuit, your trustee will decide what happens.
Written by Jonathan Petts.
Updated April 19, 2022
If you file bankruptcy and you're in a lawsuit that's pending, you may be wondering what happens. The answer depends on whether you're suing someone or someone is suing you.
If someone is suing you for money, there's 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'll no longer owe most lenders anything. No debt means 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're suing someone else for money, any money that person is required to pay you (called damages) can be seized by the bankruptcy trustee if no exemption is available to protect it. The trustee essentially steps in your shoes with respect to the lawsuit. It's important to list any and all lawsuits you file against others on your bankruptcy forms, as you may forfeit the right to proceed with the lawsuit if you don't.