One of the most frequent questions we receive from potential clients is: "So if we win this lawsuit, and the other side files bankruptcy, can I collect my damages?"
We are not bankruptcy lawyers, but, the frequency of this question warranted some research. And, know this: if your case involves a money judgment and the opposition seeks bankruptcy, we will discuss with you the benefits of working with bankruptcy co-counsel to properly take control of the situation on the bankruptcy court side.
Absent an insurer or when the insurance policy does not cover all the damages, the individual or company can be directly liable for any damages and are forced to pay out of their own pocket. For some, this may cause financial hardship, resulting in a bankruptcy petition. Individuals may file for Chapter 7 or Chapter 13 bankruptcy while business entities may file a Chapter 7 or Chapter 11 petition. The type of bankruptcy filed also makes a difference.
What Happens When Your Opponent Files for Bankruptcy?
Bankruptcy can relieve a debtor of all legal responsibility to pay an injured party for compensable damages the debtor caused the injured party. It depends on many factors, but the two primary ones are:
- When they filed for bankruptcy; and
- What type of bankruptcy was filed.
Can Judgment Debt Be Excepted from Discharge?
When a defendant is bankrupt, their debts will typically be discharged so they are no longer liable for them. However, some types of judgment debts can be excepted from discharge on the judgment creditor's objection, such as:
- Willful or malicious acts.
- Driving under the influence resulting in death or injury.
- Cases of fraud & deceit.
- Fraud, defalcation while acting in a fiduciary capacity, embezzlement, or larceny. Think, for example, misappropriation of trust funds.
When a lawsuit involves a defendant whose actions fall into one of the above categories, the plaintiff can object to the discharge of debt related to the settlement or award. The bankruptcy court will decide whether or not to exclude the debt from discharge.
Contact Us Today
When the two worlds of civil litigation and bankruptcy collide, you will need legal counsel to navigate the complex waters of judgment collection. We will get you through your litigation case, and if the need for a bankruptcy lawyer arises, we will seek to find knowledgeable bankruptcy co-counsel to help ensure your rights are protected. Contact us today at 720-441-3328 or fill out our online contact form to request further information.