Lawsuits that stop, and lawsuits that start
A Chapter 7 filing generally halts most lawsuits against the debtor through the automatic stay, though some proceedings, such as criminal cases and certain family support matters, continue. New lawsuits can also arise inside the case. A creditor may file a complaint arguing that a particular debt should not be discharged, for example because it arose from fraud, and those complaints carry a short filing deadline measured from the meeting of creditors. The trustee or a creditor may also object to the debtor's discharge as a whole, which is a broader and more serious challenge than a fight over a single debt.
When the trustee is the plaintiff
A Chapter 7 trustee's job is to collect and sell assets for creditors, and that sometimes means suing. Common targets include people who received payments or property from the debtor before the filing, relatives among them, and parties holding property that belongs to the estate. Claims the debtor could have brought, such as an injury claim or a business dispute, usually become property of the estate, so the trustee rather than the debtor generally controls them. A debtor who leaves a claim off the schedules can lose the right to pursue it and face other consequences, which is why every potential claim should be disclosed, even one that seems unlikely to be worth anything.
Responding to a Chapter 7 bankruptcy lawsuit
A complaint filed in an adversary proceeding requires a timely answer, just like any other lawsuit, and a default can be costly. Gather the complaint, the schedules and statement of financial affairs as filed, records of the transactions in question, and any communications with the creditor or the trustee. Many of these matters settle, but a settlement with a trustee typically needs court approval. Our first conversation pins down which kind of lawsuit you are facing, the deadline to respond, and whether your schedules should be amended before anything else happens.
