Can Filing Bankruptcy Stop A Lawsuit In California?

Facing a lawsuit in California is stressful. One day you’re juggling bills, and the next, a court notice or collection letter lands in your mailbox. 

It can feel overwhelming, like there’s no way out. 

Many people in this situation start wondering if filing bankruptcy could be the answer. Could it actually stop the lawsuit? Could it give you some breathing room? 

In this post, we’ll explain if filing bankruptcy stops a lawsuit. Plus, we’ll also go over the important exceptions you need to know about.

Can Filing Bankruptcy Stop A Lawsuit?

Yes, filing bankruptcy can stop a lawsuit in California in most cases.

When you file for bankruptcy (either Chapter 7 or Chapter 13), an automatic stay immediately goes into effect. The automatic stay is a powerful protection under federal bankruptcy law that temporarily halts most collection actions against you. 

That includes lawsuits over unpaid debts, wage garnishments, foreclosure actions, repossessions, and even phone calls from creditors (more on this later).

So, if you’re being sued in California for debts, filing bankruptcy will stop the lawsuit right away.

Also Read: How Long After Bankruptcy Can You Buy a House?

Types Of Lawsuits Bankruptcy Can Stop In California

Most lawsuits tied to unpaid debts will be stopped. Here are the most common lawsuits bankruptcy can freeze:

• Credit card debt cases
• Medical bill lawsuits
• Personal loan disputes
• Deficiency balances
• Wage garnishment actions

In all these cases, bankruptcy doesn’t just stop the lawsuit. It can also wipe out the underlying debt completely, depending on the chapter you file. 

That’s the long-term win that people often forget about.

Lawsuits Bankruptcy Does Not Stop

Now here’s the part that’s super important. Bankruptcy isn’t a magic eraser for every type of case. Some lawsuits fall into categories that federal law says bankruptcy can’t touch. 

Also Read: Can You Wipe Out Medical Debt In Chapter 7 Bankruptcy?

Let’s go through them one by one:

#1 Criminal Charges

Filing bankruptcy won’t touch criminal charges at all. 

The courts in California make a very clear line between debt problems and criminal behavior. 

If you’re facing something like a DUI, theft, or any other criminal matter, bankruptcy doesn’t freeze or erase it. The prosecutor and judge don’t care that you filed. 

What bankruptcy might help with are financial penalties that look like debts (say court fees or restitution payments) but even those aren’t usually dischargeable. The criminal case itself keeps moving forward no matter what. 

So if your lawsuit is tied to criminal charges, bankruptcy isn’t your shield. It’s really designed for financial issues, not legal accountability.

#2 Child Support And Spousal Support Cases

Family support obligations are totally outside the reach of bankruptcy. 

California courts treat child support and spousal support as untouchable. You can’t wipe them out in Chapter 7, and you can’t reorganize them away in Chapter 13. 

If you’re behind on payments, the lawsuit or enforcement action doesn’t stop just because you filed bankruptcy. That means wage garnishments for support can continue, and court hearings related to those obligations will still happen. 

Bankruptcy might free up some money by erasing other debts, which could make paying support easier, but the obligation itself never goes away. 

Judges see child and spousal support as top priority.

#3 Some Tax-Related Proceedings

Taxes get really complicated when it comes to bankruptcy. 

In California, certain old income taxes can sometimes be discharged if they meet strict rules, like being several years old, filed on time, and assessed long before your bankruptcy. 

But not all tax issues stop when you file. 

For example, if the IRS or California Franchise Tax Board has already placed a lien on your property, that lien often survives bankruptcy. Audits, investigations, and certain collection actions can also continue despite the automatic stay. 

Bankruptcy can pause some IRS collection efforts temporarily, but it won’t erase all tax debts.

So while bankruptcy might give you breathing room, it’s not a magic solution for every tax-related lawsuit or problem.

Also Read: Will Filing for Bankruptcy Affect My Tax Return?

#4 Lawsuits Related To Fraud Or Certain Intentional Actions

Bankruptcy laws don’t protect people from debts tied to intentional bad acts. 

If you’re being sued for fraud, embezzlement, or deliberate harm, filing bankruptcy won’t make that case go away. Creditors can even file an action inside your bankruptcy case, asking the judge to rule that the debt is not dischargeable. 

Courts draw a hard line between mistakes or financial struggles versus intentional wrongdoing. 

For example, lying on a loan application, running up debt with no intention of paying, or deliberately damaging someone’s property are all treated differently than simple unpaid bills. 

These lawsuits usually keep moving forward, and even if the automatic stay pauses them briefly, the underlying debt often survives bankruptcy.

What Happens If A Judgment Has Already Been Entered?

Timing is huge here. 

If a lawsuit is still pending, bankruptcy pulls the emergency brake. But if the creditor has already won and a judgment is on record, things get messier.

In California, a judgment often turns into a lien on your property. 

That lien sticks even after bankruptcy, unless you qualify for lien avoidance. That’s a legal tool you can sometimes use to clear a judgment lien if it interferes with property that’s protected by exemptions. 

But it’s not automatic, and it usually requires a lawyer to set it up properly.

So the earlier you file, the better. Filing before a judgment gives you more control and keeps creditors from locking onto your assets. Waiting until after can limit your options.

Chapter 7 Vs. Chapter 13 And Lawsuits

The way your lawsuit gets handled also depends on which chapter you file under.

Chapter 7 erases unsecured debts like credit cards, medical bills, and personal loans. For lawsuits tied to those debts, Chapter 7 doesn’t just stop the case – it usually ends it for good because the debt itself gets discharged. 

The downside is that if you have assets that aren’t protected under California’s exemption laws, the court might sell them to pay creditors.

Chapter 13 is a repayment plan. Lawsuits tied to debts still stop when you file, but instead of wiping everything instantly, you pay back some of it through your plan. 

That said, Chapter 13 lets you protect assets that might have been at risk in Chapter 7. It also helps if you’re behind on mortgage or car payments and want to keep your stuff.

Bottom Line

Filing bankruptcy will stop a lawsuit. Thanks to the automatic stay, most debt-related cases stop the second you file. 

That means no more wage garnishments, no more scary court dates, and no more collectors breathing down your neck.

But it’s not universal. Criminal cases, family support issues, certain tax disputes, and fraud-related lawsuits all keep going. And if a creditor already has a judgment, bankruptcy may not fully undo the damage without extra steps.

So don’t wait until it’s too late! 

If you’re staring down a lawsuit, the sooner you look into bankruptcy, the more options you’ll have.