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What lawsuits are not stopped by bankruptcy?

When someone files a lawsuit against you, you may be tempted to declare bankruptcy, especially if it involves a debt you can’t afford to repay. While bankruptcy can stop a lot of creditor lawsuits, such as collection actions by credit card companies and mortgage providers, some proceedings are not impacted by the automatic stay. Below is an overview of the different collection actions that can survive your bankruptcy.

Family law cases

Filing for bankruptcy won’t prevent your spouse from proceeding with a divorce, nor will it stop attempts to collect spousal maintenance or child support arrears. However, the automatic stay will apply to the property settlement part of your divorce because the assets are potentially part of the bankruptcy estate. The automatic stay has to be lifted before the divorce court can divide the property.

Criminal proceedings

If you are being prosecuted for a criminal offense, such as DUI or assault, then Section 362(b)(1) of the Bankruptcy Code states that the automatic stay won’t stop the court action. The bankruptcy court only has jurisdiction over your debt problems, not your alleged violations of the law, so it won’t stop or undo actions like:

  • Arrest
  • Indictment
  • Plea bargaining
  • Trial and sentencing

The automatic stay won’t interfere with any attempts by the authorities to collect debts related to criminal offenses. These include fines, restitutions, and other financial penalties that a New York or federal criminal court may impose.

Other actions

Although it’s uncommon, the bankruptcy court may allow some lawsuits to proceed if doing so won’t impact your bankruptcy case and the petitioner risks financial harm if their motion is denied. This could happen if your landlord wants to evict you but hasn’t obtained an eviction order yet or a creditor alleges that you incurred a debt through fraud and has devoted a lot of time and money pursuing the case.

If the creditor does not make the motion before you file, then you will remain protected by the automatic stay and they won’t be able to proceed against you until your bankruptcy case concludes. However, if the debt was dischargeable, their lawsuit will disappear when you receive your discharge.

Another instance where bankruptcy won’t prevent a legal action is if the government recorded a tax lien on your property before you filed. The lien will remain in place, so you will have to pay it off if you ever want to sell the property.

Contact a New York bankruptcy attorney

If you have legal actions pending against you, then your bankruptcy attorney can advise you how they may (or may not) be affected by the automatic stay. Knowing what to expect can let you make an informed decision about whether to proceed with your filing. Contact the law office of Jayson Lutzky to learn more about personal bankruptcy at 718-329-9500. Mr. Lutzky is an attorney with over 35 years of legal experience with an office in the Bronx, New York. He offers free in-office initial consultations.

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