How Does Bankruptcy Affect a Lawsuit?

Cherry Hill Bankruptcy LawyerDuring a personal injury lawsuit, you or the other party may also find that your debts far exceed your ability to pay them. As a result, either party might realize that it’s time to file for bankruptcy.

A bankruptcy filing during a lawsuit makes both the bankruptcy and the lawsuit more complicated. You may need to work both with your attorney in the lawsuit and with a bankruptcy lawyer to ensure your rights are protected and you have the assistance you need to pursue the best possible outcome in the case – whether or not you are the party who filed for bankruptcy.

When a bankruptcy is filed by either party, most civil lawsuits experience an automatic “stay.” In other words, the action stops while the bankruptcy is addressed. If either party wants to move forward with the lawsuit, they have to receive permission from the court – which can be tough to do when one side’s financial future is in question.

During bankruptcy, the filer’s property is in the hands of a trustee, who manages it until the bankruptcy is complete and pays any creditors who have been determined to have a right to a share of those assets. Because the bankruptcy seeks to answer the question, “How much money is available and who is entitled to what share of it?”, answering the principal question in a civil lawsuit – “is the defendant liable for damages, and if so, for how much?” – becomes far more difficult.

In addition, the right to sue someone else for damages is treated as an asset in most bankruptcy proceedings. Whether you are in settlement negotiations with an insurance company or you have filed a complaint, this right to sue will be evaluated and included in your assets if you file for bankruptcy. Consequently, it’s important to disclose to your lawyers about your case as soon as you can.

Choosing an experienced bankruptcy lawyer can help you navigate bankruptcy successfully, even when additional complications such as lawsuits occur. To learn more, contact the Law Office of Joel R. Spivack today at 856-488-1200 or via our online contact form.

The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney/client relationship. If you are seeking legal advice, please contact our law firm directly.

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Attorney Joel R. Spivack is an experienced bankruptcy and residential real estate transactions lawyer in Cherry Hill, New Jersey. Clients come to us for legal services, but what we really provide is peace of mind. For more than 30 years, Attorney Spivack has helped people make wise, informed decisions about bankruptcy filings, debt relief options and residential real estate transactions.
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