If I file for bankruptcy and also have a lawsuit pending, I didn't get any money yet on that lawsuit. Will I have to declare it.

Asked over 4 years ago - New Orleans, LA

filing for bankruptcy while in the midst of a pending lawsuit

Attorney answers (3)

  1. Charles Ross Smith III

    Contributor Level 16

    Answered . Permit me to add some additional, practical information to this answer. Depending on the nature of the lawsuit, it may be entirely or partially exempt. YOU NEED AN ATTORNEY TO HELP YOU DETERMINE THIS. You still must list it, but the Trustee can't take exempt property. Even if it is not exempt, the Trustee may decide not to take it. This is called "abandonment."

    In my jurisdiction, Chapter 7 trustees rarely take over even non-exempt lawsuits, unless they are pretty large. If the Trustee takes it over, they must pay an attorney to prosecute it and pay the expenses of carrying on the lawsuit.

    The Trustee really wants big money, dead bang lawsuits. Everything else presents the risk that the Trustee will recover nothing and be stuck with the expenses of the suit. Trustees are NOT risk takers. Good luck.

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    Disclaimer: Please note that this answer does not constitute legal advice, and should not be relied on, since each state has different laws, each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. This answer does not create an attorney-client relationship.

  2. Jeffrey B. Lampert

    Pro

    Contributor Level 19

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    Answered . You will have to declare the pending law suit, and even if the suit has not been filed yet, you still will have to declare your claim. The right to bring a law suit is an asset, and all assets must be declared.

    If the law suit is pending, the Trustee in a Chapter 7 can take over the prosecution of the case, hire his/her own attorney to represent you, and so on.

    In a Chapter 13, debtors have to pay money into a Plan. In my jurisdiction, the Trustee requires that the Plan provide that the proceeds be paid to unsecured creditors.

    Have you discussed your interest in a bankruptcy with your attorney handling the other matter? You should, since it may be in your better interest to resolve the other matter on favorable terms, sooner. Perhaps a recovery could be used to pay your creditors so that you could avoid filing for bankruptcy.

  3. David Leibowitz

    Pro

    Contributor Level 12

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    Answered . Yes. All assets, including lawsuits or claims which might give rise to lawsuits must be disclosed in your bankruptcy papers. Failure to do so could result in loss of discharge, inability to exempt the asset in the event your bankruptcy case is subsequently reopened, inability to pursue the suit through the doctrine of judicial estoppel (you didn't claim the suit in your bankruptcy, so you can't now say you have a lawsuit). You could also be prosecuted for bankruptcy fraud and go to jail for 5 years. So list all of your assets

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