You can file for bankruptcy while a lawsuit is pending, whether you are the one suing or the one being sued. What happens to the case depends on which side you are on. If you are the defendant, bankruptcy usually freezes the lawsuit immediately and can wipe out the underlying debt. If you are the plaintiff, your claim becomes an asset of the bankruptcy estate, and a trustee may take control of it. Either way, you must disclose the lawsuit in your bankruptcy paperwork, and hiding it can cost you both the bankruptcy discharge and the lawsuit.
If You Are Being Sued
Filing a bankruptcy petition triggers the automatic stay, a federal court order that freezes most legal proceedings and collection activity against you the moment the case is filed.1Office of the Law Revision Counsel. 11 U.S. Code 362 – Automatic Stay The person suing you cannot continue discovery, file new motions, take the case to trial, or try to collect on a judgment. Actions they take in violation of the stay are generally void.
The debt the lawsuit is trying to collect converts into a claim in your bankruptcy case. The plaintiff becomes just another unsecured creditor. If the debt is the kind that bankruptcy can erase, a discharge wipes it out along with your other qualifying debts. That is the real draw for most defendants: the lawsuit does not just pause, it can effectively end.
The stay lasts for the duration of your bankruptcy case unless the opposing party asks the court to lift it or the matter falls into one of the exceptions below.
Lawsuits the Automatic Stay Does Not Stop
Several types of proceedings continue regardless of your bankruptcy filing:
- Criminal prosecutions against you. Filing bankruptcy to derail a criminal case does not work.1Office of the Law Revision Counsel. 11 U.S. Code 362 – Automatic Stay
- Child custody and visitation matters.
- Actions to establish paternity or to set or modify child support and alimony.
- Divorce proceedings themselves, though the court cannot divide property that belongs to the bankruptcy estate.
- Domestic violence proceedings, including protective orders.
- Government regulatory enforcement actions, except enforcement of a money judgment.
If the suit against you is one of these, bankruptcy will not slow it down.
When the Plaintiff Can Lift the Stay
Even for lawsuits the stay covers, the plaintiff can file a motion for relief from stay and ask the bankruptcy court for permission to continue. The court holds a hearing and decides based on “cause,” which it evaluates case by case.2Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay Common arguments include that the case is nearly ready for trial or that insurance would cover any judgment without touching estate assets.
If the stay is lifted, the plaintiff still has to prove the case in the original court, and any judgment they win must go through the bankruptcy process for distribution unless the debt turns out to be nondischargeable.
If You Are the One Suing
When you file for bankruptcy as a plaintiff, your legal claim becomes property of the bankruptcy estate. The Bankruptcy Code sweeps in all of your legal and equitable interests in property, and courts treat pending lawsuits and potential claims as part of that.3Office of the Law Revision Counsel. 11 U.S. Code 541 – Property of the Estate
In Chapter 7, you lose control of the lawsuit. The trustee steps in, weighs the likelihood of success, the potential recovery, and the cost of continuing, and decides what to do. The trustee may push the case forward, settle on terms you would not have accepted, or walk away from it.
That last option, abandonment, is often the best outcome for a debtor who wants to keep pursuing the case. Federal law lets a trustee abandon property that is burdensome to the estate or of inconsequential value.4Office of the Law Revision Counsel. 11 USC 554 – Abandonment of Property of the Estate If the expected recovery is small or litigation costs are high, the trustee may let it go, and control returns to you. You can also ask the court to order abandonment. Anything properly listed in your schedules that the trustee has not administered by the time the case closes is abandoned back to you automatically.
Chapter 7 and Chapter 13 Handle Pending Cases Differently
In Chapter 7, the trustee liquidates non-exempt assets to pay creditors, and a pending lawsuit is treated like any other asset. The trustee runs the show; any recovery goes to creditors after exemptions and costs.
Chapter 13 lets you keep your property and repay creditors through a three-to-five-year plan funded by your income. Your claim still enters the estate and the trustee still has oversight, but Chapter 13 trustees are less likely to take direct control of a personal claim. A settlement or judgment during the plan period usually has to be factored into your repayment, which means creditors receive a larger share. Your lawyer in the pending case will need to coordinate with the bankruptcy court before settling or taking other major steps.
For defendants, both chapters trigger the automatic stay and both can discharge qualifying debts. The timing differs: Chapter 7 discharges debts in a few months, while Chapter 13 discharge comes at the end of the plan.
Protecting Lawsuit Proceeds With Exemptions
If your case produces a recovery, bankruptcy exemptions can shield part of it from creditors. The federal exemption for personal injury recoveries is $31,575 for cases filed between April 1, 2025, and March 31, 2028.5Office of the Law Revision Counsel. 11 U.S. Code 522 – Exemptions6Federal Register. Adjustment of Certain Dollar Amounts Applicable to Bankruptcy Cases A key limit: the federal exemption covers bodily injury awards but not pain and suffering damages or compensation for financial losses. Pain and suffering is often the largest piece of a personal injury recovery, so that gap catches people off guard.
Many states have their own personal injury exemption, and some are more generous. A handful allow you to protect the full value if it is reasonably necessary for your support; others set fixed dollar caps. You generally must choose between the federal set and your state’s set rather than mix them, so the better choice depends on your overall asset picture.
Exemptions do not apply to every type of case. A contract dispute or business claim will not qualify for the personal injury exemption, and the fallback wildcard categories tend to cover far less.
Lawsuit Debts That Bankruptcy Will Not Erase
If you are a defendant hoping to wipe out whatever the plaintiff wins, be aware that federal law carves out specific categories of debt that survive bankruptcy. The ones most relevant to pending lawsuits:
- Debts for money or property obtained through false pretenses, misrepresentation, or actual fraud.7Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge
- Debts arising from willful and malicious injury to another person or their property. A negligence claim may be dischargeable; an intentional tort typically is not.
- Debts for death or personal injury caused by your intoxicated operation of a vehicle, vessel, or aircraft.
For fraud and intentional-injury claims, the creditor usually has to file an adversary proceeding within the bankruptcy case to establish nondischargeability.8Office of the Law Revision Counsel. 11 U.S. Code 523 – Exceptions to Discharge A missed deadline can mean the debt gets discharged by default. These three categories are nondischargeable under both Chapter 7 and Chapter 13.
You Must Disclose the Lawsuit
Every bankruptcy filer has to provide a complete financial picture, which includes any lawsuit they are involved in on either side.9Office of the Law Revision Counsel. 11 U.S. Code 521 – Debtor’s Duties A plaintiff lists the lawsuit as an asset, with the case name, court, case number, and best estimate of value (marked “unknown” if you genuinely cannot estimate). A defendant lists the suing party as a creditor with an unsecured claim. The Statement of Financial Affairs separately asks about any case you were a party to in the year before filing.10United States Courts. Statement of Financial Affairs for Individuals Filing for Bankruptcy There is no exception for cases you think are minor or unlikely to succeed.
Hiding a pending lawsuit can unravel both the bankruptcy case and the lawsuit. A plaintiff who leaves the claim off the schedules sets up a judicial estoppel problem: by telling the bankruptcy court nothing is pending while pursuing the claim elsewhere, you take contradictory positions, and courts regularly dismiss the hidden lawsuit outright.11Supreme Court of the United States. 25-6 Keathley v. Buddy Ayers Construction, Inc. That dismissal is usually permanent.
Concealing assets can also lead the bankruptcy court to deny your discharge entirely, leaving all your debts intact and a bankruptcy on your record.12Office of the Law Revision Counsel. 11 U.S. Code 727 – Discharge Knowingly concealing assets in a bankruptcy case is a federal crime punishable by up to five years in prison.13Office of the Law Revision Counsel. 18 USC 152 – Concealment of Assets; False Oaths and Claims; Bribery Listing a lawsuit does not automatically mean you lose it or its proceeds; exemptions and abandonment often preserve significant value. The risk of hiding one almost never is.