Many people see bankruptcy as an opportunity to escape the consequences of a lawsuit. It’s not a misguided belief: if your credit card issuer or utility company is suing you to collect an unpaid balance, the automatic stay stops all further collection activities. However, filing for bankruptcy won’t stop every legal action that you are involved in. Below is an overview of four lawsuits that won’t go away even after your petition is filed.
1. Criminal Proceedings
Criminal cases survive bankruptcy because the prosecution of crimes like DUI, assault and battery, or larceny has nothing to do with your financial situation, so it is outside a bankruptcy court’s jurisdiction. If these cases result in monetary punishments like fines, administrative penalties, or restitution, they cannot be discharged in bankruptcy.
2. Divorce and Support Proceedings
Bankruptcy will have no effect on a divorce proceeding or free you from an obligation to pay child or spousal support. Theoretically, Chapter 13 bankruptcy can affect the property division part of your divorce settlement because your non-exempt assets are part of the bankruptcy estate and a family court cannot divide it until it receives permission from the bankruptcy court.
3. Your Claim Against Another Party
If you file a lawsuit to obtain compensation from another person or entity, filing for bankruptcy won’t necessarily stop the case from proceeding, but you may not be able to keep any money judgment unless you can exempt it.
If you file for Chapter 7 and can’t exempt an award, your trustee may take over the case on your behalf and distribute the money to your creditors. With Chapter 13, you would be allowed to keep pursuing the suit and include any nonexempt funds in your repayment plan.
4. Lawsuits That Support the Interest of Justice
Any party involved in a lawsuit against you can ask the bankruptcy court for permission to proceed. Although the court is not obliged to grant the request, it may do so if your bankruptcy case won’t be affected and the applicant will suffer financial harm if they aren’t allowed to proceed. Common examples include a mortgage lender that could lose money if it can’t foreclose until after your bankruptcy case ends or a car lender that wants to repossess your vehicle after you decline to sign a new contract.
Contact an Oklahoma Bankruptcy Attorney
If you are involved in a legal proceeding at the time that you file for bankruptcy protection, your bankruptcy attorney can advise you whether there will be an impact on your civil or criminal case. At the Law Offices of B. David Sisson, we make sure that our clients understand how bankruptcy can and cannot help them, so that their decision to file is an informed one. For more information or to schedule a consultation with Attorney David Sisson, please contact us.