The Defendant Files for Bankruptcy: UH OH!

Sometimes, unfortunately, you have a claim against another person. That person may end up filing for bankruptcy protection. What happens then to your case?

Well, a few things could happen. First, if there is a lawsuit pending, it is automatically put on hold (called stayed in legalese). Federal law requires that this happen.

Second, if the defendant has insurance, your attorney can file a motion to request the bankruptcy court let your case proceed. But, you can only proceed then against the insurance policy. The most you can recover in this situation is the amount of insurance that the defendant has bought. However, the case then can move forward.

Third, if the defendant does not have insurance, you have to try your case in bankruptcy court. Sometimes this makes sense and sometimes it does not. You really need the advice of an attorney at this point. It gets quite complicated.

Those are the basics of what happens when a defendant files for bankruptcy. Always consult with an attorney if this happens in one of your cases.