Can Bankruptcy Stop a Lawsuit in Arizona?

Filing for bankruptcy in Arizona can help you get a fresh start with your finances. But it doesn’t necessarily make everything go away. Instead, you should be aware of some of the lawsuits you could still face despite filing for Chapter 7 or Chapter 13 bankruptcy.

Sometimes, people become interested in filing for bankruptcy after getting a court summons. This is their first notification that they are facing a lawsuit. Generally, these lawsuits come from creditors seeking wage garnishments or other forms of payment for your debts.

Some of these types of lawsuits will go away when you file bankruptcy. And, your debt to that creditor might be discharged as part of your filing. But that isn’t the case with all types of financial obligations.

We take a look at some of the lawsuits you could still face even after declaring bankruptcy.

1. Criminal cases

Prosecution for crimes will still move forward despite your bankruptcy filing. That’s because crimes have nothing to do with your financial situation. Bankruptcy is not a “get out of jail free” card.

Even if your crimes are financially related, such as white collar crimes of mortgage fraud or the like, you won’t avoid prosecution just because you filed for bankruptcy.

2. Child custody/support

Court cases concerning child custody will still move forward no matter where you’re at in the process of filing for bankruptcy. Cases where someone seeks to establish paternity for their child also will not stop because of your pending bankruptcy case.

Settling your debts could make you look like a sound caregiver for your child, which could help you seek more custody and rights to your child. However, you should wait to apply for changes to your child custody until your bankruptcy case is complete and you’re in a better financial position.

Additionally, child support is not a debt that the courts can discharge. So be prepared to keep that commitment no matter what happens with your bankruptcy filing.

3. Divorce and spousal support

A pending bankruptcy case will not impact your divorce proceedings. However, it could impact the division of your property with your ex-spouse. That’s because you might have to sell off your property as part of your bankruptcy filing.

Types of lawsuits a bankruptcy filing can stop or pause

While filing for bankruptcy can’t stop all types of lawsuits, it can halt or pause some. Here’s a look at some of the lawsuits you might be able to avoid or postpone during your bankruptcy proceedings.

  • Foreclosure or eviction
  • Business disputes
  • Property division
  • Breach of contract
  • Personal injury lawsuits
  • Repossession

In these cases, the creditor will need to wait to see what happens with your debt. However, the creditor can file a motion for relief from the automatic stay. If the court grants their motion, then they can proceed with the lawsuit and collecting on the debt.

An example of when the courts might consider this is in the case of a foreclosure. If the individual has filed for Chapter 7 bankruptcy in which they make it clear they do not intend to make further payments on their mortgage, the courts might allow the foreclosure to proceed to limit the losses the bank experiences on that mortgage.

And if your landlord had started an eviction process before you filed for bankruptcy, the courts might grant them the rights to continue with the eviction proceedings since it pre-dated the bankruptcy filing. Another scenario where lawsuits might be permitted to proceed is in the case of fraud. Any debt you accrued through fraudulent means cannot be discharged.

If you have questions about filing for bankruptcy in Arizona, contact our law office. We’ll answer your questions and explain what to expect.