My small business is being sued for "negligent craftsmanship (interior painting)". Will bankruptcy terminate the judgement?
4 attorney answers
You have seen 3 great answers which shows you that it depends as not enough facts are known. You did not state if the business was incorporated or not, and if so, was lawsuit against you individually too or not. Those facts matter. You can see in prior answers that. Thus, what should you do?? Really simple: Call and experienced bankruptcy attorney near you..look right here on AVVO and you have one answer already from an attorney in your state!
Your asking that question implies you have not called and discussed with an experienced bankruptcy attorney near you as you would or should know the answer to that question posted here on AVVO. Other facts and issues can gravely affect your case so I will point these out for you next some issues so you know you only need to do one thing now: call an attorney near you to discuss bankruptcy. You need and want to enjoy your fresh start also. But the most important thing is to meet with an attorney as you asking this question means you have not. You care about 2 goals: keeping everything you have equity in and discharging all your debts. If you don't have any of the exceptions to discharge you will obtain that goal; most exceptions are set forth in 11 USC. 523 (Google it) like child support, some income taxes, traffic (in a ch 7) and criminal fines , and presumption of student loans. But some debts are dischargeable in a ch 13 but NOT in a ch 7 so you want to make sure and your attorney will discuss any such types with you also!
Your exemptions depend on what state you have lived in in the last 2 years and thus if in your state, then your states exemptions will apply. Most persons filing keep everything they own but your attorney will confirm that with you when they learn everything you own and the equity thereof!
Some secured debts like homes, vehicles, other secured debts an attorney will discuss your options on also as you must list any debts; but that does not mean you will lose them unless you have too much equity or are in default on paying for them! Discuss those options if they apply with your attorney too.
But other issues can arise that can greatly harm your case. Just one example: If you paid back a relative $3,000 11 months ago and now file bankruptcy next week, the trustee can SUE that relative to retrieve that $3,000 (under what is called a preference) for the benefit of the bankruptcy estate. As a result, most attorneys don't charge to meet with them the first meeting so meet with one no matter what.
Many great attorneys can be found right here on AVVO in your state so look, call, and meet one as soon as you can.
You should also want to know when to file: is there an advantage of waiting versus filing now and who should you pay between now and then! Good luck and enjoy your later fresh start.
The first question is whether the default judgment is against you doing business as OR if its against a corporation you own or against both. Chapter 7 does not discharge corporate debts. The corporation essentially stops operating the day the bankruptcy is filed. Therefore you may not want a chapter 7 if that corporation plans to continue
Individuals do get discharges in chapter 7. Negligenge or breach of contract debts or judgments would be discharged. It sounds like you do not own real estate. Judgments can be liens on the real estate you own within that jurisdiction
A non bankruptcy remedy would be to try to quickly reopen the judgment if you have a good reason for not responding and have a good defense on the merits to defeat the other side
Are you in Pennsylvania or Philadelphia area?
Top Contributor 2013
Top Contributor 2012
Unlike an human being, a corporation does not receive a discharge if it seeks bankruptcy protection. Thus, putting the business into a chapter 7 proceeding will not erase the debt as a legal matter. As a practical matter, however, it may cause the creditor to stop pursuing collection because they will realize there is nothing they can collect from the business (assuming it has no assets that can be liquidated). Thus, some business owners pursue a chapter 7 option to let creditors see the business is defunct and pursuing collection is a waste of time and money. Sometimes a business bankruptcy is inadvisable, however, For example, if the owner of the business (or others), received preferential payments or fraudulent conveyances, the chapter 7 trustee may pursue those claims.
If the creditor believes there are grounds to pierce the corporate veil. or the debt arises from fraud. they may try to sue the owner of the business. Generally speaking. a bankrutcy fiilng will not protect from a fraud judgment.
Bottom line: talk to an attorney in your geographic location (many are will to provide a free consultation).
NOTHING IN THIS RESPONSE GIVES RISE TO AN ATTORNEY-CLIENT RELATIONSHIP AND THIS INFORMATION IS GENERAL IN NATURE. BEFORE ACTING ON IT, YOU SHOULD CONSULT AN ATTORNEY WHO YOU HAVE ENGAGED TO REPRESENT YOU.
The bankruptcy won't void the judgment, but if you file a personal bankruptcy the underlying debt will be discharged and won't be enforceable against you. I strongly advise seeking out an experienced bankruptcy attorney to talk through your options and discuss the judgment itself, because if the Plaintiff tossed in certain language about fraud or misrepresentation it may take more time and effort to properly wipe out this specific debt.
Clark Dray is an attorney licensed in the state and federal courts of Colorado. This answer is for general information only and does not create an attorney client relationship between Clark Dray or The Law Office of Clark Daniel Dray and any other person. You should schedule a consultation with an attorney to discuss the specifics of your legal issues.