Judgement, Discharged and Piece of Mind

[time4cake]

What would you do?

I was sued by a neighbor's insurance company for $500,000. My insurance company denied me coverage and refused to defend me in the matter. This in no small part pushed me to bankruptcy.

I listed the neighbor's insurance company as a disputed debtor on my bankruptcy petition, and the debt was discharged in July of 2006.

However, the bankruptcy court ruled that my neighbor's insurance company is still allowed to sue my insurance company.

Now my insurance company is being sued for the $500,000. They have hired an attorney to defend me. The attorney contacted me and said he wants to get together to prepare my defense.

I politely emailed the attorney and told him that my responsibility for the debt was discharged, and that I didn't feel like putting in any effort in helping defend his client (my insurance company).

I look at it this way. If my insurance company loses the lawsuit, it means they should have been defending me in the first place, and I woulnd't have had to file bankruptcy. If my insurance company wins in their defense it means that the lawsuit did not have merit and again I shouldn't have had to file bankruptcy.

I am looking for a general opinion poll of what you might do in my position?

Thanks

[HHM]

First, what exactly happened here...did you burn down the person's house or something?

Second...you really haven't provided enough information for anyone to make an educated guess as to your situation...it sounds like you were represented by an attorney...but many novices really don't understand when a debt is and is not discharged. So, without knowing what specifically happened, I would question whether the debt to you was really discharged, or, are you talking about a Motion to Lift Stay, and the court denied the Motion as to you (meaning the plaintiff in the lawsuit cannot continue the action as to you until the BK is over), but granted it as to your insurance co. because that is a derivative action and not part of the BK.


However...with regard to helping in the defense, they could just as easily subpoena you, so you will end up helping one way or the other, might as well do it voluntarily.

[time4cake]

The disputed debt was listed in the bankruptcy, I received a full discharge, the bankruptcy case was closed, therefore I should not be held responsible for the debt. Do you disagree with this understanding?

[HHM]

I can't answer that unless I know what the debt was for...

However, you need to realize, simply "listing" a debt in your BK, does NOT discharge it. The Bankruptcy Code specifically defines what debts are and are not discharged (Chapter 5, section 523). However, procedurally, you are required to list ALL your debts so the trustee and BK court have your complete financial picture. The funny thing is, you never get a list telling you which debts have or have not been discharged, your attorney or your own research is supposed to tell you this. So, for example, back child and spousal support cannot be discharged...you still need to list this debt in your BK petition because you need to give the trustee and BK court a complete picture of your financial situation, but the back child and spousal support is not discharged and you are still liable to pay the back child and spousal support after your BK is concluded.
Or, maybe in your case (Sec. 523(6)), for willful and malicious injury by the debtor to another entity or to the property of another entity. So, for example, if you did burn down your neighbor's house, and it was determined to be a wilful and malicious act, then the money you owe your neighbor in damages would NOT be discharged in you BK, even though you listed it.

If a debt does not fall under one of the specific execeptions to discharge in Section 523, or is not otherwise excepted from discharge by court order, then the debt is discharged. But remember, the court is not going to tell you which debts you have that fall under Section 523 and which don't, the debts simply do or do not meet the criteria of Section 523.

So, without knowing the exact nature of the debt you owe your neighbor, I cannot wager an opinion on whether its been discharged...but given that your insurance company is defending, the debt probably has been discharged as to you and your insurance company is merely defending the derivative action and needs you to fill in some facts.

[time4cake]

The document read as follows:

"STIPULATION GRANTING RELIEF FROM STAY
TO PURSUE STATE COURT CIVIL LITIGATION

It is hereby stipulated that any monetary award entered in the civil action against (time4cake) is effective only against (time4cake's) insurance carrier and may not be collected against (time4cake) individually."

Also, the suit was not for a willful or malicious act. I hired a contractor to perform work. The neighbor is alleging that this work caused his basement to flood with raw sewage 8 months after the work was performed. The contractor has since gone out of business, and his insurance company is also denying their responsibility in the matter.

I was left as the only man standing, and I did not have the resources to defend myself in a lawsuit of this size. Since my insurance company was not willing to defend me I saw little recourse but to file bankruptcy.

[HHM]

Sounds like you are in the clear...So back to the original question, you might as well participate to a certain extent, because they can just subpoena you. If you participate, then you will get some idea what is going on instead of going in blind by being subpoenaed.

[time4cake]

HHM,

Thanks so much for your advice. Your comments have always been so helpful. It does give me some of the piece of mind I was seeking. I will likely volunteer if the attorney makes some additional effort, but I am of the opinion that I was his first stop. I would like him to do his homework and look at all the information that has accumulated since the incident 4 years ago before coming to me again.

It just gets frustrating. My insurance company was not their for me when I needed them, but now they want me to volunteer my time and take off work when they need me. I suspect you understand why I am a tiny bit bitter about the entire situation.

Anyway, thanks again for registering your opinion and bringing up the relevant section of the bankruptcy code.

[LostOne0069]

I would probably respond in the form of a question... "why should I help you defend the insurance company when the insurance company wouldn't help defend me?" Perhaps he'll have a good reason. You can always say "NO" later.

[time4cake]

Lost One,

I agree, and I will say just that if he actually calls me back. I am not interested in helping, but I am still trying to remain civil.

[HHM]

Right, I wouldn't go out of your way to help them, help them on your terms; I only suggest that you don't let it go so far that you will be subpoenaed, (not that being subpoenaed is a bad thing, its really not a big deal.).