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OMITTED UNSECURED CREDITOR--CHAPTER 7 BANKRUPTCY

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  • OMITTED UNSECURED CREDITOR--CHAPTER 7 BANKRUPTCY

    Michael A. <[email protected]> wrote:
    I had sued a deadbeat client for breach of contract (trial scheduledfor October 8th). Last week I got a call from his attorney informingme the deadbeat had filed a Chapter 7 Bankruptcy. I had never receivedformal or informal notification of the Bankruptcy and in fact had noknowledge of it until the attorney called.Not from the Court, theTrustee or this attorney.He informed me a Discharge under Chapter 7had been granted that very day.
    [debtor's attorney demanded OP dismiss his lawsuit or face
    penalties]

    This is for discussion purposes only, and is not legal advice. I'm
    not a lawyer. If you want legal advice, hire a lawyer.

    Well, bankruptcy _does_ place an automatic stay on all pending
    actions. But AFAIK that only prevents them from going forward
    (discovery, depositions, motions, trial, judgement, etc.). But from
    what you say, the bankruptcy is now completed and the debtor has
    received a discharge. If your claim had been extinguished by the
    discharge, then there might be sanctions for continuing the action
    over a debt that no longer exists.

    However, one of the rules is that creditors must be listed on the
    bankruptcy forms; they are then notified by the bankruptcy referee and
    given the opportunity to file their claim and/or appear at the
    "meeting of creditors". Then they get a share of whatever assets
    are available after satisfying "senior" claims -- usually in the
    following order:
    1. secured debts, to the extent they can be satisfied by the
    security
    2. taxes
    3. wages/salaries due to employees

    If you were truly not listed on the bankruptcy, then ISTM that your
    debt was not discharged in the bankruptcy. That would mean that you
    could now proceed with your lawsuit, regardless of what the debtor's
    attorney says.

    There's one other possibility to consider: that you _were_ listed as a
    creditor on the bankruptcy papers, but the referee neglected to notify
    you about the "meeting of creditors" etc. I'm sure you have _some_
    remedy in that case, but I'm not sure what it is -- whether your debt
    ends up surviving the bankruptcy, or whether you have to petition the
    referee for your "share" of the distribution of assets.

    I think you did the right thing by demanding to see a copy of the
    bankruptcy petition, lists of assets and debts, etc. And if the
    amount you are owed is substantial, I think it would be a good idea
    to invest $200-300 in a quick consultation with an attorney to see
    what your options are. It's even possible you might get a free
    initial consult if you are considering hiring the attorney to pursue
    further legal action.

    Remember that attorneys are not above lying (to people other than
    their client) about what the law says or means. AFAIK this is not
    banned by the Bar Association's canons of ethics.
    --
    I pledge allegiance to the Constitution of the United States of America, and
    to the republic which it established, one nation from many peoples, promising
    liberty and justice for all.

The LaborLawTalk.com forum is intended for informational use only and should not be relied upon and is not a substitute for legal advice. The information contained on LaborLawTalk.com are opinions and suggestions of members and is not a representation of the opinions of LaborLawTalk.com. LaborLawTalk.com does not warrant or vouch for the accuracy, completeness or usefulness of any postings or the qualifications of any person responding. Please consult a legal expert or seek the services of an attorney in your area for more accuracy on your specific situation.
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