Bankruptcy can have a major impact on civil litigations and judgments. When bankruptcy is filed, it starts a set of legal protections that often pause or discharge civil claims and court orders. A breakdown of how this works is as follows:
- Automatic stay
- In most cases, filing bankruptcy immediately stops any civil case through a legal procedure called automatic stay. This includes lawsuits to collect debt, foreclosures, enforcement of civil judgments, etc.
- Existing civil judgments
- If a judgment is related to credit card or unpaid medical debt (dischargeable debt) then it could be wiped out when bankruptcy is filed.
- Nondischargeable debt, fraud, wilful injury, student loans, etc., likely will not be forgiven.
- Civil litigation in process
- To continue with the lawsuit after the automatic stay has started, the opposing party must ask the bankruptcy court for permission.
- Once the court agrees, the case will proceed, however, the resulting judgment will still depend on the outcome of the bankruptcy
- Bankruptcy discharge and its effects
- Once bankruptcy is completed, many dischargeable debts will be forgiven and you are no longer required to pay.
