Does bankruptcy affect lawsuits?

Filing bankruptcy will automatically stop most lawsuits against you, whether they’re pending or new. The reason being is that once you file your bankruptcy papers with the court, under any chapter of the Bankruptcy Code, it immediately triggers an injunction called an automatic stay that keeps your creditors from suing you to collect their debts. The automatic stay will also stop the effect of any judgments against you and stop executions or garnishments against your wages and bank accounts. This automatic stay even applies to the Internal Revenue Service and to the state and federal government and remains in effect until a judge lifts the stay, when you’re discharged from your debts, or when the item of property you’re being sued for is no longer the property of the bankruptcy estate. Keep in mind that a bankruptcy filing will not affect criminal proceedings or actions used to collect alimony or child support. Furthermore, if you’re currently involved in a lawsuit in which you may be rewarded monetary damages, you may have to use part or even all of your cash award to pay your creditors. How much you’ll be allowed to keep and how much you’ll have to give up to your creditors will be dependent on the circumstances surrounding both your lawsuit and your bankruptcy.