A bankruptcy petition filed in one of the U.S. Bankruptcy Courts in Illinois will affect a civil lawsuit pending in a court in that state in a number of ways. One of the primary reasons many people seek protection in bankruptcy court is to obtain immediate protection from creditors, including those represented in a pending lawsuit.
The Impact of an Automatic Stay
The primary impact the start of a bankruptcy case has on a civil trial in Illinois is the automatic stay order issued by the bankruptcy court. The Bankruptcy Code includes a provision that causes the immediate stop of any type of civil court proceeding upon the filing of a bankruptcy petition with the bankruptcy court. You need not take any further action to obtain the protections of the automatic stay provision of the bankruptcy law beyond filing the petition with the court clerk of the bankruptcy court.
Notification of Automatic Stay
The bankruptcy court issues a notification to any creditors or opposing parties to lawsuits that you list in a bankruptcy petition. Despite the fact that the bankruptcy stay occurs automatically, a period of several days to a couple of weeks can lapse before these creditors and parties to lawsuits receive notification of the bankruptcy filing. Although you technically are not required to provide any direct notice yourself to creditors or to a person or company suing you in a civil court in Illinois, directly advising the opposing party in a lawsuit is advisable. Personally notifying them of the bankruptcy filing helps prevent any further action in that civil case.
Jurisdiction of Bankruptcy Court is Paramount
The decisions of the bankruptcy court take precedent over those of an Illinois court in a civil lawsuit. The orders of the bankruptcy court, including an order establishing an automatic stay of the Illinois court proceedings, govern what the state court can and cannot do while the bankruptcy case is pending. An Illinois court cannot take any action that contradicts any type of order of a bankruptcy court, including one for an automatic stay of proceedings.
Removal of Automatic Stay
Although a stay of the Illinois civil court proceedings is immediate upon the filing of bankruptcy, the stopping of a case is not necessarily permanent. Either the other party to the lawsuit, or the person who filed bankruptcy herself, can file a motion with the bankruptcy court seeking to have the stay lifted or stopped. The bankruptcy judge, at her discretion and based on the facts of the case, will then decide whether to terminate the automatic stay as it relates to the civil court proceeding.