Bankruptcy / Bankruptcy Q&A / Filing Bankruptcy / Lawsuits

Should I File Bankruptcy Before Or After A Lawsuit?

Many debtors considering bankruptcy are facing lawsuits. Sometimes it’s a lawsuit filed by a creditor or maybe even a lawsuit filed because of a non-debt related civil matter. But most debtors have the same question, should they file bankruptcy before or after the lawsuit?  In most situations, there is no valid reason to wait until after a lawsuit to file bankruptcy. Unless the outcome of the lawsuit will help you determine whether or not you will file bankruptcy, why wait?

A matter of fact, there are several good reasons for not delaying your bankruptcy pending the outcome of a lawsuit:

  1. Bankruptcy will stop lawsuits in their tacks. If you are going to file bankruptcy, there is no reason to delay the filing just because there is a pending lawsuit against you.  Lawsuits are a drain on the debtor, taking up their time, energy and money.  By filing bankruptcy before a lawsuit, you save yourself the stress and strain of going through that ordeal.
  2. Many creditors move quickly after winning a judgment against a debtor. What this means is that after the lawsuit is concluded, creditors often swiftly seize assets before a debtor can move to protect them in bankruptcy.  And while bankruptcy will stop a judgment and prohibit creditors from seizing your assets after the bankruptcy filing, often times the debtor moves too slowly and the creditors are able to seize assets before the automatic stay goes into effect.
  3. While bankruptcy’s automatic stay may be able to recover some or all of the debtor’s assets if a creditor moved quickly to seize their assets after a lawsuit, sometimes it just may not be possible.  Why risk losing your assets after a lawsuit when filing bankruptcy before a lawsuit is underway can save you a lot of heartache and stress?