Does Declaring Bankruptcy Eliminate Money Owed If Being Sued By Another Person?

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Because bankruptcy laws vary from state to state, the exact impact of pending lawsuits on a bankruptcy filing can vary. There are a couple of rules that remain intact in each state, but the decision on whether bankruptcy eliminates a current lawsuit can depend on several factors that are often out of your control.

What Gets Discharged In Bankruptcy?

In most states, any unsecured debt gets discharged in a bankruptcy. Unsecured debt includes credit cards, unsecured loans, judgments against you and medical bills. As long as a debt is not tied to any kind of collateral or other types of asset, it can qualify to be discharged in bankruptcy.

Can I Be Sued While Filing Bankruptcy?

The short answer to whether or not you can be sued if you are filing bankruptcy is maybe. In most states, the courts will allow the case to go to completion and then deal with whatever judgment has been made. The most common reason people get sued is because of a car accident. Your liability for any judgment against you after a car accident while you are filing bankruptcy depends on several factors.

What Are The Laws In Your State?

Some states allow judgments to stand that were determined before the actual discharge took place. If you are filing chapter 7, then there is a chance that your judgment could be discharged. But if you are filing chapter 13, then the court might roll your judgment into your debt pool and force you to pay it.

What Are The Circumstances Surrounding Your Judgment?

If your case is a standard auto accident claim, then you stand a good chance of being able to discharge the debt in bankruptcy. But if it is discovered that you were under the influence of drugs or alcohol when your accident occurred, then the courts may leave your judgment in effect and force you to pay it back.

The State And The Court

The reality is that the decision on whether your lawsuit will be discharged in your pending bankruptcy is up to the laws of your state and the disposition of the judge. Most states leave plenty of leeway for judges to use their own personal judgment on whether or not a lawsuit can be discharged in your bankruptcy.

Declaring bankruptcy can protect you from some very large unsecured debts and court judgments against you. If you are filing bankruptcy when you get sued, then there is a good chance that the judgment will get discharged and you will never have to worry about it.