Can You File for Bankruptcy After Being Sued? Stay and Discharge

Yes, you can file for bankruptcy after being sued, and you can do it at any point in the lawsuit — from the week you were served through the day a judgment is entered against you. The moment your petition is filed, a federal court order called the automatic stay freezes the lawsuit in place. Whether that pause turns into a permanent end to the case depends on the type of debt the creditor sued you over and the chapter of bankruptcy you file.

How the Automatic Stay Pauses Your Lawsuit

The second your bankruptcy petition hits the court docket, the automatic stay takes effect. It stops creditors from starting new lawsuits, continuing existing ones, enforcing judgments, garnishing wages, levying bank accounts, or seizing property.¹ Hearings and trial dates in the pending case get suspended once the state court knows about the filing.

You don’t have to ask for the stay. It applies automatically to every creditor, and a creditor who knowingly ignores it can be ordered to pay your actual damages, attorney’s fees, and sometimes punitive damages.¹ That penalty gives the stay real teeth, and most collection attorneys back off immediately once they’re notified.

The stay lasts until your case closes, gets dismissed, or you receive your discharge, whichever comes first.² A straightforward Chapter 7 runs about four months. A Chapter 13 repayment plan stretches three to five years, and the stay runs with it.

A creditor isn’t entirely out of options. They can file a motion asking the bankruptcy judge to lift the stay and let the lawsuit continue, and the court can grant that relief where there’s “cause” or where you have no equity in collateral the case doesn’t need.¹ In practice, these motions come mostly from mortgage and car lenders. An unsecured creditor suing over a credit card balance or personal loan rarely has grounds.

Lawsuits Bankruptcy Won’t Stop

The stay is broad, but some proceedings keep moving no matter what you file. If your lawsuit falls into one of these categories, bankruptcy won’t help with the lawsuit itself:

Criminal prosecutions. Bankruptcy addresses debts, not criminal liability.¹
Family law cases. Paternity actions, child custody disputes, domestic support claims, divorce (apart from division of estate property), and domestic violence proceedings all continue.¹
Government regulatory enforcement. Agencies enforcing health, safety, or regulatory laws can keep going, though they still can’t use that exception to collect a money judgment.¹

In any of these, you still have to defend the case on its own merits. Bankruptcy handles the debt side separately.

Timing: Filing Before or After a Judgment

Filing is available at any stage, but earlier is usually easier. Once a creditor gets a judgment, they can record it in local property records, which creates a lien against your real estate. That lien attaches to your property independently of the debt itself. Even if bankruptcy wipes out your personal obligation, the lien can survive and give the creditor a claim against your home equity when you sell or refinance.

There is a fix. You can file a motion to “avoid” a judgment lien if it eats into property exemptions you’d otherwise claim.³ A homestead exemption is the typical example. Under the federal exemption scheme used in cases filed on or after April 1, 2025, you can protect up to $31,575 of equity in your home. If a judgment lien would impair that protected equity, the bankruptcy court can strip it off entirely, turning what was a secured claim back into unsecured debt eligible for discharge.

Filing before the creditor obtains a judgment avoids the lien question altogether. Filing after it still works, but you’ll likely be running the extra avoidance motion on top of the main case.

Whether the Lawsuit Debt Will Actually Be Wiped Out

Most ordinary lawsuit debts are fully dischargeable. Credit card balances, medical bills, personal loans, and breach-of-contract claims all go away with the discharge. The lawsuit becomes moot, and the creditor is left with whatever the bankruptcy process paid them, which in a typical Chapter 7 is often nothing.

Some debts survive bankruptcy no matter what. These are the categories to pay attention to if the lawsuit against you involves anything beyond unpaid bills:

Child support and alimony are never dischargeable.
Recent income taxes, and taxes where no return was filed, typically survive.
Student loans survive unless you prove “undue hardship” in a separate proceeding, which remains a hard standard to meet.
Debts for money, property, or services obtained through misrepresentation or actual fraud survive.
Debts arising from embezzlement or theft cannot be discharged.
Debts for willful and malicious injury to a person or property survive in Chapter 7.⁴

Fraud, embezzlement, and willful injury debts don’t get an automatic pass. The creditor has to file an adversary proceeding in the bankruptcy court and prove the debt belongs in one of those categories. The deadline is tight: 60 days after the first date set for the meeting of creditors.⁵ Miss the window, and the debt gets discharged regardless of what it was.

One trap worth flagging if you’re sued and considering filing: don’t put new charges on your cards. Luxury-item charges totaling more than $900 with a single creditor within 90 days of filing are presumed non-dischargeable, and cash advances exceeding $1,250 within 70 days get the same treatment.⁴ The presumption can be rebutted, but it creates an immediate problem in your case.

Chapter 7 or Chapter 13

Chapter 7 is a liquidation. A trustee takes any non-exempt assets, sells them for creditors, and the court discharges most remaining debts. It runs roughly four months from filing to discharge.⁶ It’s the fastest route to kill a lawsuit debt, but a means test applies: if your income is above your state’s median, the court can dismiss the Chapter 7 or push you into Chapter 13.⁷

Chapter 13 is a three- to five-year repayment plan. You keep your property and pay creditors a portion based on your income. The discharge comes at the end of the plan, so the automatic stay protects you much longer. Chapter 13 also discharges a slightly broader set of debts, including debts for willful property damage and debts from divorce property settlements that aren’t domestic support obligations.⁶ If the lawsuit alleges you intentionally damaged someone’s property, Chapter 13 may be the only path to a discharge of that debt.

Reduced Protection for Repeat Filers

If you had a bankruptcy case dismissed within the past year and file a new one, the automatic stay expires after just 30 days unless the court extends it.¹ The extension hearing has to happen inside those 30 days, and you have to show the new case was filed in good faith. The court presumes it wasn’t if the prior case was dismissed for failing to file documents, failing to make plan payments, or if nothing meaningful has changed in your finances.

Two or more dismissals in the past year is worse. You get no automatic stay at all, and you’d have to ask the court to impose one against an even stronger bad-faith presumption.² If this is your second or third filing within a year, don’t assume the stay will stop the lawsuit the way it did the first time.

Tell the State Court You Filed

The bankruptcy court notifies the creditors you listed, but it does not automatically notify the state court handling the lawsuit. File a document called a Suggestion of Bankruptcy or Notice of Bankruptcy Filing with the clerk of the court where the lawsuit is pending. Include your name, the lawsuit case number, and the bankruptcy case number, filing date, and court. Send a copy to the opposing attorney.

Do this right away. Until the state court has formal notice, scheduled hearings can still happen, and a creditor who truly didn’t know about the filing has a defense if they inadvertently continue the case. The notice removes the ambiguity.

What Happens to the Lawsuit After Your Discharge

If the debt behind the lawsuit is discharged, the creditor is permanently barred from pursuing it. The discharge works as a lifelong injunction against any further collection activity related to that debt, including the lawsuit.⁶ You or your attorney will usually need to go back to the state court and file a motion to dismiss, pointing to the discharge. The state court won’t dismiss on its own.

If the debt turns out to be non-dischargeable, the lawsuit resumes once the bankruptcy case concludes. The stay bought you time but didn’t eliminate the claim. If liability had already been established before you filed, collection on the judgment may be the only step left.

Filing Fees and Attorney Costs

The federal filing fee for Chapter 7 is $338, which breaks down into 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.⁸ If you can’t pay upfront, you can ask for permission to pay in installments.

Attorney fees are the larger piece. A standard Chapter 7 commonly runs from several hundred to a few thousand dollars depending on location and complexity. Chapter 13 fees tend to run higher because of the multi-year plan, but they’re often paid through the plan itself rather than up front. You’re also required to complete a credit counseling course before filing and a financial management course before discharge, which together typically cost about $20 to $50. None of these are optional if you want the case to succeed.

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