Can I Sue Someone Who is in Bankruptcy?

February 7, 2014 | Category: Bankruptcy Litigation, Chapter 11, Chapter 13, Chapter 7

When an Atlanta, Georgia individual files for protection under the Bankruptcy Code, the “automatic stay” immediately goes into effect. The automatic stay prevents any of the debtor’s creditors from filing a lawsuit or taking other collection action against the debtor while the bankruptcy case is active, and causes any pending lawsuits to be held in abeyance until the debtor either receives a bankruptcy discharge, or the bankruptcy case is dismissed or otherwise closed.

The Bankruptcy Code strongly favors granting a discharge of most debts to “honest and unfortunate” debtors. Some debts, such as certain taxes, student loans, and divorce and child-support related obligations, are automatically excluded from a debtor’s discharge. The Bankruptcy Code also provides, however, for creditors who can prove that they have been wronged by the dishonest or malicious actions of a bankrupt debtor to obtain a ruling from the Bankruptcy Court that their claim is not subject to being discharged in bankruptcy. A creditor obtains such a determination by filing an “adversary proceeding”, which is a federal lawsuit in the Bankruptcy Court brought in connection with a bankruptcy case.

The relevant legal provisions are found at Sections 523(a)(2), 523(a)(4), 523(a)(6), and 727(a) of the Bankruptcy Code. Section 523(a)(2) provides that debts that are obtained by fraud or misrepresentation are nondischargeable in bankruptcy. Section 523(a)(4) provides that debts arising from a debtor’s fraud or defalcation of a fiduciary duty are nondischargeable in bankruptcy. Section 523(a)(6) provides that debts arising from “willful and malicious injury” committed by a debtor to a creditor or their property are nondischargeable. Finally, Section 727 provides that a debtor’s discharge of all of their debts may be denied if the debtor has acted fraudulently or dishonestly in the bankruptcy process itself, or has concealed or destroyed assets that could have been used to repay her debts.

Since 1986, The Rothbloom Law Firm has represented individuals and corporations in Cobb, Fulton, Gwinnett, Cherokee, DeKalb, and all metro-Atlanta counties as creditors in Chapter 7, Chapter 11, and Chapter 13 bankruptcy cases. Our attorneys, Howard Rothbloom and Adam Herring, provide thoughtful counseling, careful planning, and creative lawyering in helping creditors obtain favorable results in bankruptcy cases. Contact us today to discuss the options available to you when someone who owes you money seeks bankruptcy relief.