Can You File Bankruptcy After Being Sued? Stay, Discharge, Costs

Yes, you can file for bankruptcy after being sued, and you can do it at any point in the case—before the first hearing, in the middle of litigation, or even after a judgment has been entered. The moment you file, a federal court order called the automatic stay freezes almost all collection activity against you, including the lawsuit itself. Whether the case disappears for good or simply pauses depends on what the creditor is suing you over, which chapter of bankruptcy you file, and how you handle the weeks leading up to filing.

How the Automatic Stay Pauses the Lawsuit

Filing a bankruptcy petition triggers the automatic stay under 11 U.S.C. § 362. Creditors cannot start new lawsuits, continue existing ones, enforce judgments, garnish wages, levy bank accounts, or seize property while the stay is in effect.¹ Once the state court handling your lawsuit learns of the filing, scheduled hearings and trial dates are suspended.

The stay is automatic. You don’t have to ask the bankruptcy judge for it, and the creditor gets no advance warning. A creditor who knowingly ignores the stay can be ordered to pay your actual damages, attorney’s fees, and sometimes punitive damages.¹ That penalty is why most creditors and their lawyers stop the moment they get notice.

The protection lasts until the case is closed, dismissed, or you receive your discharge, whichever comes first.² A straightforward Chapter 7 case runs about four months. A Chapter 13 case with a repayment plan can keep the stay in place for three to five years.

An unsecured creditor suing over a credit card, medical bill, or personal loan rarely has grounds to get the stay lifted, because there’s no collateral at risk. Secured creditors (mortgage lenders, auto lenders) can and do ask the court for permission to proceed when their collateral is losing value or you have no equity in it.¹

Lawsuits the Stay Won’t Stop

Some cases keep moving no matter what you file. The stay does not reach:

Criminal prosecutions. Bankruptcy handles debts, not criminal liability.¹
Family law matters: paternity, custody, domestic support obligations, divorce (except division of estate property), and domestic violence cases.¹
Government regulatory or police power actions—environmental enforcement, license revocations, and similar proceedings. The government still can’t use this exception to collect a money judgment through the back door.¹

If the lawsuit against you falls into one of these categories, you’ll still have to defend it on its merits while the bankruptcy handles your other debts.

Will the Lawsuit Debt Actually Be Wiped Out?

Most ordinary lawsuit debts are fully dischargeable. Credit card balances, medical bills, personal loans, breach of contract claims—when the discharge enters, your obligation is permanently eliminated and the lawsuit becomes moot. The creditor walks away with whatever came out of the bankruptcy process, which in a Chapter 7 case is often nothing.

The exceptions are where lawsuits get complicated. Certain debts survive bankruptcy regardless of your discharge:

Child support and alimony.
Recent income taxes and taxes on returns you never filed.
Student loans, unless you prove undue hardship in a separate proceeding.
Debts obtained through fraud or misrepresentation.
Debts arising from embezzlement or theft.
Debts from willful and malicious injury to a person or property, in Chapter 7.³

For fraud, embezzlement, and willful injury, the creditor doesn’t get an automatic exemption. They have to file an adversary proceeding in the bankruptcy court within 60 days after the first date set for the meeting of creditors.⁴ Miss the deadline, and the debt gets discharged anyway. If the creditor does file on time and wins, the lawsuit picks up where it left off after the bankruptcy ends.

Filing Before a Judgment vs. After

You can file bankruptcy after a judgment has already been entered. It just creates one extra problem. Once a creditor has a judgment, they can record it in local property records and create a lien against your real estate. That lien attaches to your property independently of the debt itself, so a bankruptcy discharge of your personal obligation may still leave the lien in place, hanging over your home’s equity when you sell or refinance.

Bankruptcy law provides a fix. You can file a motion to avoid a judgment lien to the extent it impairs an exemption you’re entitled to claim.⁵ The homestead exemption is the usual example. Under the federal exemption scheme used in cases filed on or after April 1, 2025, you can protect up to $31,575 of home equity. If a judgment lien cuts into that protected equity, the bankruptcy court can strip it off entirely, turning the creditor’s secured position back into an unsecured, dischargeable debt.

Filing before a judgment is generally the cleaner path. You avoid the lien question altogether. But if the judgment already exists, the avoidance tool is there for exactly this situation.

Chapter 7 or Chapter 13 When You’re Being Sued

Chapter 7 is a liquidation. A trustee gathers your non-exempt assets, sells them to pay creditors, and the court discharges most remaining debts. Start to finish is usually about four months.⁶ It’s the fastest route to eliminating a lawsuit debt. You have to pass a means test comparing your income to your state’s median, and if your income is too high the court can dismiss the case or push you into Chapter 13.⁷

Chapter 13 is a repayment plan lasting three to five years. You keep your property and pay creditors a portion of what you owe based on income and expenses. The stay protects you throughout the plan. Chapter 13 also discharges a slightly broader set of debts, including debts for willful damage to property and debts from divorce property settlements that aren’t domestic support.⁶ If a creditor is suing you over property damage they claim you caused on purpose, Chapter 13 may be the only route to discharging that debt.

Traps to Avoid Before You File

A Recent Dismissed Case Weakens Your Stay

If you had a bankruptcy case dismissed within the past year and file a new one, the automatic stay expires after 30 days unless the court extends it. The extension hearing has to happen before those 30 days run out, and you have to show the new case was filed in good faith. Two or more dismissed cases in the past year, and no stay arises at all—you’d have to ask the court to impose one.² If your goal is to stop a lawsuit, this is the situation where you most need an attorney.

Preferential Payments to Family

People about to file often pay back family first. The bankruptcy trustee can claw those payments back. Any payment to a creditor in the 90 days before filing can be recovered as a preferential transfer if it gave that creditor more than they would have received in Chapter 7. For insiders (relatives, business partners, close associates) the window stretches to one year.⁸ Paying your brother back $5,000 eleven months before filing is exactly what the trustee will pursue.

Last-Minute Credit Charges

Credit card charges for luxury goods or services totaling more than $900 to one creditor within 90 days before filing are presumed non-dischargeable. Cash advances over $1,250 taken within 70 days of filing carry the same presumption.³ If you’re already thinking about bankruptcy, stop using credit for anything non-essential.

Telling the State Court You’ve Filed

When you file, the bankruptcy court sends notice to every creditor you listed. The state court handling the lawsuit does not automatically find out. You need to file a document, usually called a Suggestion of Bankruptcy or Notice of Bankruptcy Filing, with the clerk of the court where the case is pending. Include your name, the lawsuit’s case number, and the bankruptcy case number, filing date, and court. Send a copy to the creditor’s attorney.

Do this immediately. Until the state court gets formal notice, hearings can go forward and the judge won’t know to stop them. Filing the notice removes any doubt and puts the case on ice.

What Happens to the Lawsuit After Your Discharge

If the debt behind the lawsuit is discharged, the creditor is permanently barred from continuing the case. The discharge acts as a lifelong injunction against collection.⁶ You or your attorney will usually need to go back to the state court and file a motion to dismiss, citing the discharge. The state court doesn’t clean this up on its own.

If the debt turns out to be non-dischargeable, the lawsuit resumes once the bankruptcy case ends. The stay bought you time; it didn’t eliminate the claim. If liability was already established, the only issue left may be collection.

What It Costs

The Chapter 7 filing fee is $338: a $245 filing fee, a $78 administrative fee, and a $15 trustee surcharge. Chapter 13 is $313, covering a $235 filing fee and the $78 administrative fee.⁹ You can ask to pay in installments if you can’t cover it upfront.

Attorney fees add to the total. Chapter 7 fees vary by location and complexity, commonly running from several hundred to a few thousand dollars. Chapter 13 fees run higher because of the multi-year plan, but they can often be rolled into the plan payments. You’re also required to complete a credit counseling course before filing and a financial management course before discharge, together costing roughly $20 to $50. None of it is optional if you want the case to succeed and the lawsuit to go away.

1
Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay
2
Office of the Law Revision Counsel. 11 US Code 362 – Automatic Stay
3
Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge
4
Legal Information Institute (LII) / Cornell Law School. Federal Rules of Bankruptcy Procedure Rule 4007 – Determining Whether a Debt Is Dischargeable
5
Office of the Law Revision Counsel. 11 USC 522 – Exemptions
6
United States Courts. Discharge in Bankruptcy – Bankruptcy Basics
7
United States Courts. Chapter 7 – Bankruptcy Basics
8
Office of the Law Revision Counsel. 11 US Code 547 – Preferences
9
United States Courts. Bankruptcy Court Miscellaneous Fee Schedule