Many people are struggling financially these days, and being hit with a lawsuit for an accident may be the thing that finally causes a person to file for bankruptcy protection. If the defendant does this in your case, you could lose any hope of collecting the compensation due to you if you don’t act fast. Here are three things you can do to save your case when the defendant files chapter 7 bankruptcy in the middle of your lawsuit.
Ask for the Automatic Stay to Be Lifted
When the defendant files for bankruptcy, all lawsuits are either halted until the bankruptcy is resolved or automatically dismissed. One way to save your lawsuit is to ask the bankruptcy court to lift the automatic stay so your case can proceed. Unfortunately, since your suit is not secured by collateral, you would be considered an unsecured creditor. The court will typically only lift the automatic stay if the debt from the lawsuit wouldn’t be discharged in the bankruptcy. In the case of personal injury lawsuits, only accidents caused by the defendant driving drunk are non-dischargeable.
Debts that aren’t listed in the bankruptcy schedules won’t be discharged either, so you may get lucky here if the defendant forgets to add your case to his or her paperwork.
Challenging the Bankruptcy Filing and Discharge
Another thing you can do is initiate adversarial proceedings and challenge the person’s bankruptcy filing and discharge. This is best done if you think your lawsuit has a good chance of being discharged by the bankruptcy court. During the hearing for the adversarial proceeding, you can request that the court do not discharge your specific debt or object to the entire bankruptcy.
To be successful here, you have to show the defendant committed fraud or didn’t comply with the court’s orders in some way. For example, if you can show the defendant committed insurance fraud (e.g. staged an accident with you), the court may allow your lawsuit to survive the bankruptcy filing or dismiss the defendant’s bankruptcy case altogether.
Wait Until the Case Ends and Refile
The third option is to wait until the person’s bankruptcy case ends and refile your lawsuit afterwards. This is a gamble because the court may include your lawsuit in the bankruptcy discharge and you won’t be able to collect the compensation due to you at all. However, if your case survives the bankruptcy filing, you’ll have a better chance of collecting any compensation you’re awarded since the defendant won’t be able to file chapter 7 bankruptcy again for several years.
The bankruptcy court provides powerful protections to debtors that can end your lawsuit before you’re awarded the money you’re due. Talk to an attorney as soon as possible if you receive a bankruptcy notice in the mail. The lawyer can help you navigate the issue to obtain a satisfactory outcome. For more information, check out websites like http://www.vanblk.com.