Lawsuit and Defendant Identification

[FranksMom]

Can anyone tell me how to identify whether or not a Defendant is being sued "personally" as opposed to having their LLC sued? I received a summons for a business debt that I personally guaranteed. As far as I am aware, 11 USC 362 protects me from any type of actions to collect or file suit regarding my personal guarantee. The LLC is a separate entity, and is not exempt from suit. In this summons, the company is named, and as I and my husband, separately as Defendants. Is is just me, or am I personally being sued, in violation of the stay?

[justbroke]

Can anyone tell me how to identify whether or not a Defendant is being sued "personally" as opposed to having their LLC sued? I received a summons for a business debt that I personally guaranteed. As far as I am aware, 11 USC 362 protects me from any type of actions to collect or file suit regarding my personal guarantee. The LLC is a separate entity, and is not exempt from suit. In this summons, the company is named, and as I and my husband, separately as Defendants. Is is just me, or am I personally being sued, in violation of the stay?

Was this a creditor who was listed on your petition?

LLCs are interesting. but since you personally guaranteed the debt, they can come after you and the LLC.

If you listed them on your petition (Schedule D, E or F), then they are in violation of the Automatic Stay imposed by 11 USC 362!

I would send them a very firm letter letting them know that they are in violation. Include a copy of your Notice of Bankruptcy.

Please be advised that the Debtor, John Doe, has filed for protection by the U.S. Bankruptcy Court under Title 11. A Chapter 13 case was filed on June XX, 2008. Your company was listed as a creditor in that case and was served, by the Court, a Notice of Bankruptcy and with instructions regarding an Automatic Stay.

You were aware of the Bankruptcy filing by notice from the Court. You are now in violation of the Automatic Stay imposed by 11 USC 362. I am prepared to ask the Court to enter an Order to Show Cause and have you appear before the Court to answer why you should not be found in contempt and be sanctioned.

Then, end it with something like this...

Please provide me with a notice of voluntary dismissal with prejudice within five (5) days of the date of this letter or be advised that we will seek sanctions against you.

Make sure you send it certified return receipt. I would send it overnight as well... just so that the 5 days don't elapse in the mailing. Otherwise, you may want to change the 5 days to 7-10 days.

You should also answer the pleading on behalf of the yourself (as defendant) and state that you are protect under 11 USC 362 with a active case with the U.S. Bankruptcy Court... even though a summary judgment for not having answered, would be moot.

You may then need to address the suit in respect to the LLC. Did you let it dissolve? Does it have assets? That's a different topic, really.

[FranksMom]

Been there, done that

I did all of the above and got a response from the attorney, who claimed that she will "Maintain the action filed against you [personally], obey the automatic stay and hold the claims and suit in abeyance until the chapter 13 concludes". How in the world can you hold an active suit in abeyance while obeying the automatic stay? It sounds absurd to me.

I have filed an order to show cause (OSC), to which the attorney responded that they are "in no way pursuing suit against the debtors personally". How is this possible when we are named as individual defendants in addition to the company? This is why I second guessed myself about whether or not we are defendants. From what I've researched, there is a HUGE difference between suing an LLC and naming it's statutory agent, and suing the company AND it's owners as individuals. Sounds like semantics...

Your thoughts?

[justbroke]

Okay, you're in a much better place than I thought you were. So that I have this straight, you already notified them of the stay violation.

First, 11 USC 362 is basically an automatic abeyance for any active suits and pursuits (as I like to call them)... and stops anyone from bring a new suit upon the debtor.

Did they file a lawsuit after you filed Bankruptcy? That would make a HUGE difference.

I would say, get a hearing. Since they have filed a response, you should call the clerk and get a hearing on the Order to Show Cause.

If the suit was filed post-petition, then they are in complete willful violation of the Automatic Stay. Otherwise, the stay acts as an abeyance. However, your discharge will discharge the debt as to you and they can't pursue you post-discharge.

When you get to the hearing, you will proffer to the court that the debt is dischargeable in regards to yourself. That they law prohibits the defendant (the person who tried to sue you and the LLC), from pursuing the debt. That the lawsuit was started post-petition. (I think the post-petition issue is the kicker.)

Also, you will enter that letter the lawyer sent you, into evidence. It will be Plaintiff's Exhibit A. In the Response to the order, they say they aren't pursuing you, but in the response to your letter (not seen by the court), they say they are just holding it in abeyance!

Sounds like doublespeak to me! Get a hearing!!!

[justbroke]

P.S. make sure you, after you successfully have your Order to Show Cause granted, and they are found in contempt... file a Motion for Sanctions.

Make sure you get some punitive damages. Your actual damages will include any lost work, transportation, filing fees, postage, etc... to prepare and litigate your case. Even if you use vacation time, that's time which you can get as actual damages.

[FranksMom]

Post Petition Filing

Yes, the suit was filed post petition... and was not withdrawn even after I sent them a warning letter. Ridiculous, huh?

[justbroke]

Yes, the suit was filed post petition... and was not withdrawn even after I sent them a warning letter. Ridiculous, huh?

Absolutely. The nice thing I found though... Bankruptcy Judges will hear just about any case! I like the fact that you can bring disputes inside the Adversarial Proceedings process (I know, some folks don't like APs). however, it can be a handy tool for the Debtor, because the Bankruptcy Court, believe it or not, is on the side of the Debtor more than the Creditors, IMHO.

This is the perfect venue to beat them up in. Worse case... the stay is still in place, and they have to wait to get you. Best case... they are found in contempt and they get spanked!

[FranksMom]

Spanked... lol I like that. Back to the original query, though.... I and my husband are named as defendants WITH the LLC... the lawyer is going to try to squirm his way out of that by saying that they aren't going after us because there is an automatic stay? Wouldn't they withdraw us as individual defendants if that was the case?

I have 3 APs pending for separate matters... I had read that I can bring an OSC in lieu of an AP in most courts... was hoping it would be a little less labor intensive. The APs I have now are set for pre trial, and yes, getting choked on procedure would be really, really lousy.

[justbroke]

Spanked... lol I like that. Back to the original query, though.... I and my husband are named as defendants WITH the LLC... the lawyer is going to try to squirm his way out of that by saying that they aren't going after us because there is an automatic stay? Wouldn't they withdraw us as individual defendants if that was the case?

See my response in the PM. They are trying to wiggle, but you OBVIOUSLY have them in a corner. I know this because they ask for no Fed. R. Bankr. P. Rule 9011 sanctions!

You have them on the ropes, so to speak.

[FranksMom]

See my response in the PM. They are trying to wiggle, but you OBVIOUSLY have them in a corner. I know this because they ask for no Fed. R. Bankr. P. Rule 9011 sanctions!

You have them on the ropes, so to speak.

What do you mean they ask for "no Fed. R. Bankr. P. Rule 9011 sanctions"? Isn't that what they were threatening to do?

[justbroke]

What do you mean they ask for "no Fed. R. Bankr. P. Rule 9011 sanctions"? Isn't that what they were threatening to do?

No, they are saying that they aren't in violation... and... because you didn't ask for a relief under Fed. R. Bank. P. RULE 9011 (the place where sanctions are allotted), then you don't deserve any.

However, pro se litigants are afforded all due care in proceedings. (See my Blog on Pro Se - Advantage or Not.) There are certain things, especially pleadings, in which the judge must weight in your favor. If you get a chance to submit another memorandum of law or a briefing, bring up the relief you seek under Rule 9011 (they call it Rule 11, but they are referring to Federal Rules of Civil Procedure Rule 11, but in Bankruptcy Court, it's 9011).

[HHM]

The issue is not who is "named" on the complaint, the issue is what cause of action are they alledging against you personally.

It is true, that if you filed a personal BK, you are relieved of any personal responsibility for the debt (the automatic stay, or the BK is simply a DEFENSE to the law suit, you have show up an defend), but with regard to the complaint, that assumes they are actually sueing you personally in that capaicity. The LLC is fair game, they can sue the LLC. Generally, when someone sues a company, they sue EVERYONE. The owners of small companis are often included in the lawsuit as "trustees of assets" of the company. Thus, its important to know what exactly the plaintiff is alledging against you personally in the complaint.

If the lawsuit alledges you are personally responsible for the debt; then you need to file a Motion to Dismiss in the CIVIL COURT and use your discharge order.

[FranksMom]

What I did...

Funny you mention that; I prepared an answer, similar to your suggestion and found out upon arrival at the court that there was a filing fee of over $200 to submit my answer!! Instead, I filed a suggestion of Bankruptcy at no cost, and will wait to see what happens next. I don't appreciate the additional time expenditure that was required of me.

The company is named in the suit, and so are my husband and I, as "husband and wife". Within the suit, it alleges that we are responsible for the debt, because I signed a personal guarantee. While this may be true, I believe that pursuing us personally as opposed to the company "and its officers" or however they would like to phrase it is a stay violation. Generally, when suing an LLC, all you need to name is the company itself, and any DBAs associated with it. I think naming me personally, knowing I'm in BK and protected by the stay is risky at best, and a clear and willful violation at worst.

[HHM]

Funny you mention that; I prepared an answer, similar to your suggestion and found out upon arrival at the court that there was a filing fee of over $200 to submit my answer!! Instead, I filed a suggestion of Bankruptcy at no cost, and will wait to see what happens next. I don't appreciate the additional time expenditure that was required of me.

The company is named in the suit, and so are my husband and I, as "husband and wife". Within the suit, it alleges that we are responsible for the debt, because I signed a personal guarantee. While this may be true, I believe that pursuing us personally as opposed to the company "and its officers" or however they would like to phrase it is a stay violation. Generally, when suing an LLC, all you need to name is the company itself, and any DBAs associated with it. I think naming me personally, knowing I'm in BK and protected by the stay is risky at best, and a clear and willful violation at worst.

Frankly, you can "think" whatever you want. The problem is you are wrong. Without more facts, this creditor has not violated the automatic stay. First, they can sue the company, the auto stay does not affect that. The creditor will get a pass as for as violation of the automatic stay because under state law they are required name all necessary parties to a lawsuit (guess what, you personally guaranteed the debt, and you are an owner of the company, you are a necessary party), and you havn't been injured by this violation, so there are no damages.

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.

[FranksMom]

Frankly, you can "think" whatever you want. The problem is you are wrong.

Whoa...! A bit snippy of an answer, but I appreciate your opinion, that's what forums are for, right?

Law is extremely interpretive; and people can present a variety of different view points. If there were definitive "rights and wrongs", we wouldn't need a judge, would we?

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? That doesn't make a whole lot of sense. I agree with you that the LLC is open and liable, but I am not.

Your thoughts?