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With the current economic situation many people are dealing with legal matters and possible bankruptcies. Bankruptcy can have some negative effects on your case. The decision is really a matter of timing. The most notable effect is that bankruptcy puts a stay on pending litigation. The “stay” is a “time out”. It is a period of time where everything is held in place and cannot change until the bankruptcy is over. For example, if you file for divorce, and them file for bankruptcy (or file a bankruptcy before your divorce is over) the divorce case is put in a time out. The normal sixty day wait from the filing of the divorce till you can have a final hearing is extended until the divorce is final.

There are ways to lift the stay and allow your case to go forward. Lifting a stay requires approval from the bankruptcy court and trustee. Lifting the stay may not resolve all your issues though. If the litigation will change your financial circumstances (money coming in or assets leaving) there could be liens placed on the assets by the bankruptcy trustee.

If the other side in your case files a bankruptcy, these same effects come into play. I have had several injury cases delayed for very long periods of time by bankruptcies filed by defendants.

If you have a legal matter to resolve, and there is a possibility of a bankruptcy as well, you should discuss the timing and strategy of both matters with your lawyer before you take any action. It may be best to start and finish one before the other. It is all a matter of timing, what is at risk and statutes of limitation.