The Consequences of Suing a Debtor After the Bankruptcy Case has been Filed

Three Key Takeaways

• A lawsuit filed against a debtor while the automatic stay is in place is void. If the state court dismisses that lawsuit after the statute of limitations has run, the plaintiff cannot simply refile against the debtor.
• Notice of the bankruptcy does not have to come in the form of a formal bar-date notice. An answer or correspondence that says the defendant filed bankruptcy is sufficient to put the plaintiff on constructive notice that the bankruptcy has been filed and the automatic stay is in effect.
• Retroactive stay relief is discretionary and narrow. Reopening a closed case to ask for it years after a plaintiff learned of the bankruptcy is likely futile and the claim against the debtor may disappear.

Commencing or continuing litigation against a party in bankruptcy is unfortunately easy to mishandle. Most attorneys know that the automatic stay precludes a lawsuit against the debtor from going forward as soon as the bankruptcy petition is filed, but pressing forward without stay relief will result in any complaint or litigation being void. If that case is later dismissed, and the statute of limitations has run, the plaintiff cannot simply refile the complaint, as illustrated in In re Shoppingtown Mall NY LLC, 2026 WL 2529381 (Bankr. W.D. Pa. Aug. 27, 2026).

An illustration of a common timeline follows where a plaintiff files a lawsuit against a defendant. The case can be a contract action, a foreclosure, a personal injury or wrongful death claim, or any other suit in which the debtor is the defendant. Unbeknownst to the plaintiff, the defendant filed a chapter 11 petition before the complaint was filed and the plaintiff never asked the bankruptcy court to lift the automatic stay. In some cases, and in Shoppingtown, the statute of limitations runs and the complaint cannot be refiled as a new case. The proper way to try to save the lawsuit would be to reopen the chapter 11 case and annul the stay retroactively so the state court action can survive. The plaintiffs in Shoppingtown Mall made that request, but it was denied by the bankruptcy court.

Stay Relief after the Petition is Filed

The automatic stay in section 362(a) of the Bankruptcy Code stops the commencement or continuation of a lawsuit against the debtor the moment the petition is filed. Actions taken in violation of the stay are automatically void ab initio. In re Siciliano, 13 F.3d 748, 750 (3d Cir. 1994). Section 362(d), however, allows a bankruptcy court to grant relief from the automatic stay, including by “annulling” it, which can have the effect of retroactively validating a filing that would otherwise be void. Annulling the automatic stay is a discretionary remedy and courts grant it retroactively only under “exceptional circumstances.” In re Coletta, 380 B.R. 140, 147 (Bankr. E.D. Pa. 2007).

If the bankruptcy case has already been closed, the litigant is required to take an extra step. Pursuant to section 350(b) of the Bankruptcy Code, the court may reopen a closed case for cause. In In re Roberts, 659 B.R. 271, 278-81 (Bankr. W.D. Pa. 2024), the bankruptcy court listed the factors that govern that request, including whether the moving party would be entitled to the underlying relief if the case were reopened. If that underlying request is futile, the motion to reopen will often be denied.

The Lawsuits Against the Debtor and Constructive Notice of the Bankruptcy

Shoppingtown Mall NY LLC (the “Debtor”) owned and operated a shopping center in DeWitt, New York. On August 13, 2019 (the “Petition Date”), it filed a voluntary petition for relief pursuant to chapter 11 of the Bankruptcy Code in the Western District of Pennsylvania. The Debtor confirmed a plan on August 3, 2021 and the case was closed on December 16, 2021.

After the Petition Date, three plaintiffs sued, in addition to other co-defendants, the Debtor in New York state court over an incident at a Chili’s on the mall property. Two wrongful death actions were filed in August and September 2020 and a personal injury action was filed in January 2021. The plaintiffs stated they did not know about the bankruptcy when the case was filed.

The plaintiffs later received clear constructive notice of the bankruptcy. In June 2021, while the bankruptcy case was still pending, the Debtor answered the complaints and pleaded that the plaintiffs could not maintain the actions due to the bankruptcy. On May 23, 2022, counsel for the Debtor wrote the state court judge, providing a copy to plaintiffs' counsel, stating that the Debtor filed bankruptcy before the lawsuits were commenced and that the Debtor was protected by the automatic stay. A later bill of particulars stated that the actions were improperly commenced because the plaintiffs never sought stay relief. Despite that notice, the plaintiffs proceeded in state court. In September 2025, the Debtor moved to dismiss the wrongful death cases on the ground that the actions were filed in violation of the automatic stay. By then, the statute of limitations period precluded the plaintiffs from dismissing the cases and re-filing. On January 14, 2026, more than four years after the bankruptcy case closed, the plaintiffs moved to reopen so they could ask for retroactive stay relief.

The Difficulty of Obtaining Retroactive Stay Relief After Constructive Notice

Whether a case may be reopened for the purposes of annulling the automatic stay is left to the discretion of the bankruptcy court. The Roberts factors determine whether reopening a bankruptcy case is appropriate: (a) how long the case had been closed; (b) whether relief was available in another forum; (c) prejudice from reopening; (d) any benefit to the debtor; and (e) whether the moving party would be entitled to relief if the case were reopened. While retroactive stay relief could only be granted by the bankruptcy court, the remaining factors did not support reopening. For example, (a) the case was closed for more than four years; (b) reopening the case would require the Debtor to incur the expense of defending a stay-relief motion the plaintiffs did not pursue promptly; and (c) there was no benefit to the Debtor.

The bankruptcy court, however, focused primarily on the fifth factor (whether the party would be entitled to relief if the case were reopened), which determined the outcome. Again, the underlying request in this case was retroactive annulment of the stay to continue litigation commenced after the Petition Date. In the Third Circuit, where the case was pending, the relevant factors are: (a) whether the creditor was aware of the filing or encouraged violation of the stay; (b) whether the debtor engaged in inequitable, unreasonable, or dishonest behavior; and (c) whether the creditor would be prejudiced. In re Myers, 491 F.3d 120, 129 (3d Cir. 2007).

The plaintiffs argued they never received “actual written notice of a debtor’s bankruptcy filing and bar claims date” as known creditors. The bankruptcy court rejected that argument. Awareness of the bankruptcy filing is treated as knowledge of the stay and any oral or written notice of the bankruptcy is sufficient to put a party on constructive notice of the filing. The filed pleadings in the underlying cases put the plaintiffs on notice that a bankruptcy was filed and hey were in violation of the automatic stay by proceeding with the litigation. The 2022 letter and later filings said the same thing in plainer terms. Creditors also have an affirmative duty not to violate the stay. Myers, 491 F.3d at 128. Continuing the state court actions for years after those papers were served was, on this record, an affirmative violation.

The Debtor did not dispute that the plaintiffs were not listed on its schedules and that the Debtor did not amend after the lawsuits were filed. The bankruptcy court held that those omissions did not rise to inequitable, unreasonable, or dishonest behavior once the Debtor put the plaintiffs on notice of the bankruptcy in the state court papers.

Despite the prejudice the plaintiffs faced if the actions were dismissed and they could not refile after the limitations periods expired, the bankruptcy court held that this hardship did not justify retroactive stay relief. Prompt stay relief after the plaintiffs received notice of the bankruptcy might have been available pursuant to section 362(d)(1).

Balancing those facts, the bankruptcy court found it “patently clear” that the plaintiffs would not obtain retroactive stay relief if the case were reopened. Shoppingtown Mall, 2026 WL 2529381, at *8. The motion to reopen was denied as futile.

How to Protect the Claim

Treat an answer or a letter that mentions bankruptcy as constructive notice of the stay. Known-creditor notice is the framework for whether a claim was discharged. However, it is not the rule with respect to whether a lawsuit filed during the pendency of the automatic stay is void. Immediately take action in the bankruptcy case once you have constructive notice of the bankruptcy filing.

Move for stay relief before you keep litigating. A complaint filed during the stay is void. Continuing the litigation after receiving notice simply compounds the violation.

If you are prosecuting or defending a lawsuit and one of the parties has filed bankruptcy, or you have received constructive notice of a bankruptcy filing, the attorneys at FactorLaw can help you evaluate whether stay relief is required, whether a closed case should be reopened, and how to protect the claim before the limitations period expires.