What Happens to Lawsuits During An Austin Bankruptcy?
1. Automatic Stay Stops Most Lawsuits
When you file for bankruptcy, an automatic stay goes into effect immediately.
This legally pauses most collection actions, including:
Debt collection lawsuits
Wage garnishments
Bank account levies
Property repossessions or foreclosures
The stay gives you temporary relief from creditors while your bankruptcy case proceeds.
2. Debt-Related Lawsuits
Chapter 7 (Liquidation):
Lawsuits over unsecured debts (credit cards, medical bills, personal loans) are generally discharged.
Creditors can no longer pursue you once the bankruptcy is complete.
Chapter 13 (Repayment Plan):
Debt-related lawsuits are typically handled through the repayment plan.
Creditors cannot continue litigation outside the plan without court permission.
3. Exceptions – Lawsuits That Continue
Some legal matters are not affected by bankruptcy:
Criminal cases – charges or prosecutions continue.
Child support or alimony – these obligations survive bankruptcy.
Certain tax claims – especially recent taxes.
Personal injury claims caused by DUI or intentional harm – cannot be discharged.
4. Pending Personal Injury or Lawsuits for Property
If you are suing someone else, like in a personal injury claim, that lawsuit may become part of the bankruptcy estate.
The bankruptcy trustee could have rights to the proceeds, depending on the chapter and exemptions you claim.
You may need the trustee’s approval to settle or continue the lawsuit.
5. Practical Impact in Austin
Filing for bankruptcy often relieves pressure immediately by stopping creditor actions.
Lawsuits related to debts are usually paused or discharged.
Non-dischargeable claims continue, so it’s important to consult a local Austin bankruptcy attorney to understand your specific situation and exemptions under Texas law.
***Peace Of Mind For You, A Fresh Start For Your Family***
Austin Bankruptcy Lawyers
3800 North Lamar Blvd # 200
Austin, TX 78756