Lawsuit and Defendant Identification

[FranksMom]

More Information...

I did some more thinking regarding HHM's comment regarding what is contained in the suit is more important than who is named in the suit, which I agree with. I just re-checked the pending action, and it clearly states that the Plaintiff "prays for relief against defendants [company name] and [debtor name], jointly and severally, as follows..."

Hope this is helpful.

[justbroke]

The problem with filing a suggestion of BK vs an Answer is that it does not affect the suit against the LLC or as to you personally as Trustee in Assets of the LLC. And because the LLC is not protected by the Auto Stay, the lawsuit can go forward practically in the same manner even if you had not been named personally, they can still call you for deposition, serve you with interrogatories, or if you don't respond, get a default judgment.

That part I agree with. I believe the poster stated that the language within the suit stated that they were pursuing them individually as guarantors.

Of course, the answer lies in the language and the interpretation.

[justbroke]

I would ask you, HHM, based on the information I've provided already, what WOULD constitute a stay violation in this case? Are you saying that because I am the owner of the LLC that I am not afforded any personal protection from a law suit and the actions that accompany it?

I read from HHM's response that if it's not an in personam suit -- read, they are going after you personally -- then the Stay is moot as they are proceeding against an entity (the LLC). That's all fine, and I know that you understand that well.

However, there are questions around whether the spirit of that suit and how the pleading was worded, reads like it's a pleading to pursue you in personam (as an individual).

I can see both arguments. The key will be what the wording is like, of course.

Also, I can't believe your State charges $200 to answer a complaint. Sheer robbery!

[HHM]

Let's back-up, what is the big picture here.

Does the LLC have any assets? Is there any risk to you if this creditor gets a judgment against the LLC?

Also, we need to separate the legal from the practical. Legally, the creditor cannot get a judgment against you personally as gaurantor of the debt so long as the automatic stay is in place, and in that respect, you should file a Notice of BK with the Civil Court where the lawsuit was brought. But at the same time, the action cannot be dismissed as to you UNTIL you receive your DISCHARGE. From a "practical" standpoint, the suit is going to proceed because the LLC is not protected by the auto stay (Note, you filed this in the chapter 13 forum, you might be able to get a stay as to the LLC under the codebtor stay provision of chapter 13, Section 1301). Since you are the owners of the LLC and since you are the people with most direct knowledge of the LLC, you will be involved in the lawsuit whether you like it or not, assuming you choose to participate.

[justbroke]

... But at the same time, the action cannot be dismissed as to you UNTIL you receive your DISCHARGE...

That's what I thought and responded in a PM. Without a discharge, there is no protection for that pre-petition debt. However, a local lawyer got the company suing his client to dismiss a similar suit prior to discharge.

Maybe, in this case, the OP should have the LLC file Bankruptcy... Chapter 7 or otherwise.

I didn't ask, FranksMom... if you were going to liquidate the business or otherwise seek to protect the business?

HHM, how long can a suit be held in abeyance? (This is an interesting thread... I want to stick around and learn. I may have this particular issue soon, but not expecting it against my corporation.)

[FranksMom]

In Personam

To clarify... I am well aware that the LLC is liable for the debt. I have already filed the suggestion of bankruptcy in civil court. The LLC's assets are few, and I planned to allow the LLC to absorb the judgment (should one arise) and move on from there. I did not consider the co-guarantor stay protection options, which I might look into further.

I didn't mention this initially, but the attorney who filed this suit has already been found in violation of the stay while representing another creditor in my case, and was ordered to turn over property back to me. A hearing for damages is pending on that matter...

What I'm asking is, in your (or anyone's) opinion, does the language that I posted earlier:

"prays for relief against defendants [company name] and [debtor name], jointly and severally, as follows..."

indicate that this suit is "in personam?" If so, this would definitely be a violation of the automatic stay, and the suit should either be withdrawn or amended. I could understand keeping it in abeyance if it were not going after me personally.

[HHM]

That's what I thought and responded in a PM. Without a discharge, there is no protection for that pre-petition debt. However, a local lawyer got the company suing his client to dismiss a similar suit prior to discharge.

Maybe, in this case, the OP should have the LLC file Bankruptcy... Chapter 7 or otherwise.

I didn't ask, FranksMom... if you were going to liquidate the business or otherwise seek to protect the business?

HHM, how long can a suit be held in abeyance? (This is an interesting thread... I want to stick around and learn. I may have this particular issue soon, but not expecting it against my corporation.)

That really depends on the state's rules of civil procedure. Generally, a case can sit in the system for 5 years.

As to the auto-stay...obviously, if a creditor takes property after notice of a BK, that is a clear violation. Initaiting a suit where one of the defendants may not be covered by the auto-stay is more questionable. Again, that specific language you point too is too general (every complaint says that), but it does indicate an in-personum cause of action, but at the same time, you haven't suffered damages.

[FranksMom]

So wouldn't there be a way to adjust the language in a suit to make it abundantly clear that the plaintiff is going after the LLC only, and NOT the owner/debtor who is protected by the automatic stay?