What If I File Chapter 7 Before a Summary Judgment Hearing?

By Kevin Owen

If you are facing a lawsuit to collect a debt and may lose before trial because of summary judgment, filing for bankruptcy might offer some protection. Because a lawsuit filed against you is considered a debt, it might be dismissed with most of your other debts through the Chapter 7 bankruptcy process if you have few assets or income.

Immediate Effect

Upon the filing of a petition for bankruptcy, you are entitled to immediate protection from all debt collection actions due to the automatic stay granted under federal bankruptcy law. Once the bankruptcy is filed, the clerk of the bankruptcy court issues a notice to all of the creditors listed on your petition, which should include the creditors who filed the lawsuits against you. You should also provide notice to the court in which the summary judgment motion is pending to stop all processing of that case.

Lifting the Stay

There is a legal procedure your creditors may exercise to ask the bankruptcy court to lift the automatic stay that is blocking the civil litigation against you. The creditor must file a motion with the judge explaining why the court should apply a legal exception that exempts its lawsuit from the automatic stay. There are a few arguments the creditor can make. The creditor could provide evidence and argue that you have more assets than debts and your bankruptcy petition is a scheme to fraudulently avoid liability in its lawsuit. The creditor could argue you have no equity in the property that is the subject of the lawsuit and that it would be harmed if it did not recover the contested property. The creditor can move to have the stay lifted by showing you have an insurance policy that fully covers any payment that you would otherwise owe.

Get a free, confidential bankruptcy evaluation. Learn More


Automatic stay protection under Chapter 7 bankruptcy does not stop the issuance of a decision on summary judgment for every type case. For example, bankruptcy protection does not extend to child support or divorce proceedings, criminal cases or tax audits. The automatic stay also does not protect against lawsuits filed to recover debts that were incurred after you filed for bankruptcy.

Multiparty Litigation

The automatic stay may not impede the issuance of summary judgment on a case if the lawsuit you are involved in has multiple defendants. Although the stay is applied to you as a defendant in the litigation, the case will likely proceed against other co-defendants if they have not also filed for bankruptcy. In some circumstances a court may still be able to issue a decision on the merits of the case, but withhold issuing a final judgment against you because of the bankruptcy.

Get a free, confidential bankruptcy evaluation. Learn More
What Happens When a Creditor Is Sanctioned in a Bankruptcy Case?



Related articles

What Does a Discharge in a Chapter 13 Bankruptcy Mean to Debtors?

Bankruptcy allows a debtor to obtain relief from his creditors if he meets certain legal requirements. Chapter 7 bankruptcy is a liquidation of assets, while Chapter 13 bankruptcy involves repayment of some, or all, of the debt owed. If a debtor’s income is above the state median income and he has enough disposable income to repay his debt, Chapter 7 is not an option. In both types of bankruptcy, there eventually is a discharge of debt.

Objections to Discharge Chapter 7

Most people who file for Chapter 7 bankruptcy are able to discharge the vast majority of their debts almost automatically. To prevent discharges from being granted for debts that are legally not subject to discharge or to debtors who don’t deserve them, creditors and other parties in interest have a period of time to file objections. Once an objection is filed, the matter must go before the bankruptcy court for a final decision before a discharge order will be entered.

Can You Sue a Person When You Are in a Chapter 13?

When you file for Chapter 13 bankruptcy, you petition a federal court for protection from creditor lawsuits, judgments and collections. The automatic stay that results from the petition applies to anyone who has a claim against you, whether or not they have already filed a lawsuit. In effect, a bankruptcy suspends all claims until it is discharged or dismissed. In the meantime, you may be able to pursue a claim of your own, with some important conditions.

Related articles

Can Creditors Attempt to Get Money After a Discharge?

When you file a petition for bankruptcy, you are asking a federal court for protection from creditors and time to work ...

Bankruptcy Treatment of Default Judgments

If you've filed for bankruptcy protection, you benefit from an automatic stay of collections by your creditors. This ...

How to File an Objection in a Bankruptcy Case

Bankruptcy is a legal process intended to give debtors a fresh financial start. When an individual files bankruptcy, ...

What If My Cosigner Files Bankruptcy?

If your debts have become unmanageable, you have the option of filing for bankruptcy protection. In a Chapter 7 ...

Browse by category
Ready to Begin? GET STARTED