You can file for bankruptcy during a civil lawsuit, even if the outcome of the trial has not been determined. However, filing before the outcome is known could be risky if the lawsuit is your only credit issue. A bankruptcy filing ruins your credit with the damage impossible to erase even if you win the lawsuit and withdraw from the bankruptcy. It's possible to file for bankruptcy in as little as one day, making it easy for you to wait for the outcome of the lawsuit to decide what to do.
Bankruptcy courts allow for emergency bankruptcy filings using an abbreviated application only a few pages long. It is considered a skeletal or "bare bones" filing and allows you two weeks to submit a formal application. The abbreviated application is so brief that it can be filled out in less than 20 minutes. You can postpone paying the bankruptcy filing fees until you complete the application.
An emergency filing is a perfect backup plan while awaiting the outcome of the lawsuit. The party suing you could win a court judgment but a quickie bankruptcy filing prevents collection of damages. Bankruptcy offers immediate, powerful protection through a provision an automatic stay. A bankruptcy judge signs the automatic stay prohibiting debt collection efforts against you while you are protected by the court.
Lawsuits Must Stop
The automatic stay prohibits lawsuits from continuing or being filed while the stay is in effect. Lawsuits often lead to to bank or wage garnishment, but the automatic stay protects against that as well. However, lawsuits and judgments can be settled out of court, providing an alternative to bankruptcy that is far less punitive.
Bankruptcy is a viable option if you have other extreme financial problems, such as an ongoing garnishment. Protect yourself by seeking advice from a bankruptcy attorney as well as the attorney advising you about the lawsuit. Together, they can help you create a reasonable strategy for protecting your finances. Chapter 7 bankruptcy is the quickest form of bankruptcy and can eliminate damages from a lawsuit in just months. There are income limits for Chapter 7 and usually only people with modest incomes qualify. Another option is Chapter 13, but it requires a payment plan of three to five years. Bankruptcy fees as of 2011 are $299 for Chapter 7 and $274 for Chapter 13.