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Lawsuit filed after bankruptcy with potential settlement

New York, NY |

I filed bankruptcy a year ago and was discharged 6 months ago. I recently learned of some information and decided to sue, and I may receive a potential settlement.

The lawsuit was not filed before or during the bankruptcy process, but after my bankruptcy was discharged. If I win, is the bankruptcy court able to take those winnings?

Attorney Answers 4

Posted

If the acts forming the basis for the cause of action occurred before you filed the bankruptcy, you must reopen the bankruptcy, add the lawsuit to the schedules, and prosecute the case using the bankruptcy estate.

If you file the case without doing this, the lawsuit will be dismissed if the defendant’s attorney is smart enough to know what should be done. If the case should be listed in the bankruptcy petition and is not, it will be dismissed with prejudice.

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Posted

If the cause of action arose prior to filing, your failure to disclose it may prohibit you from prosecuting this case. Furthermore, if you were to reopen and add it as an asset, you would need to be able to exempt it. Doing this may lead to the trustee objecting to the exemption for failure to disclose it. If that happens, you will lose the entire amount of any potential settlement.

Talk to a bankruptcy attorney now about your options.

However, if the cause of action arose after filing, like an accident that happened after you filed, then the settlement is based on something post-petition and has nothing to do with your bankruptcy. What controls this is when the events that gave rise to the claim happened, not when you sued.

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Posted

The above posters are correct, it all comes down the the date the cause of action arose.

One quick thing to point out, however. Perhaps the Trustee will not want to administer the asset. Assuming you reopen your case to amend Schedule B and put the possible lawsuit in there. The Trustee will re-examine and make a determination of asset or no asset based on your description of the lawsuit in Schedule B and in person, if necessary. You also have your exemptions to help keep the recovery, so make sure to amend Schedule C too.

Remember, unless there is a reasonable and meaningful distribution to creditors, AFTER paying the Trustee to adminisister the asset, there really is no asset.

Good Luck!

Very truly yours,

Dean D. Paolucci, Attorney at Law
Select Legal, PC
53 West Jackson Blvd., suite 709
Chicago, Illinois 60604
P > 312.427.9131
F > 312.427.9130
E > Dean@SelectLegal.com
W > www.SelectLegal.com

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Posted

If the right to bring the suit arose before the bankruptcy case was filed, you have no right to sue on the claim. The case must be reopened and the trustee appointed as the plaintiff (person suing). Any money left over after any possible exemption and payments on claims, attorney fees, trustee fees, etc., would go to you.

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