Legal Question Re Trustee owning pre bk filing lawsuit

[CoBelle]

Sticky wicket issue:

I filled out my shedules and advised that there was a pending lawsuit in which I had a counterclaim. Since I had no idea what those claims might be or what would be allowed and the other side had asked for the whole suit to be dismissed, it appears that my attorney did not enter anything on Schedule B (assets) or C (some of the claims might be exempt).

The other side, also versed in bk, called the Trustee's attorney to settle the suit on the cheap. Offered 5k for what might be a minimum of $25k damages plus attonrey fees taht are already @$12k

A question came up with the lawsuit judge today: can the Trustee settle the entire counterclaims or just the claims that are not exempt? And what about the attorney fees, which I claimed as unsecured debt in my discharged (in Feb) Chapter 7?

I'm of course upset in that I already paid for the property damage, loss of income and medical expenses for the injury I suffered as a result of the Plaintiffs. I understand that the property damage claim if awarded would belong to the estate, but it hurts that I might lose any chance of getting reimbursed for the medical and loss of income. It sucks.

Any chance I could agree (with Plaintiff) who asked that the lawsuit be dismissed and then refile my counterclaims?

PS: the trustee's attorneyh did say that I should have listed my countersuit and exemption and that she had a right to object based on bad faith, but then said she wassn't saying that is what she would do. But now that I know I should have put it on the schedules I'm afraid not to!!!!!!! The Trustee's A said it would be a lot easier if I had a lawyer...guessing this means she would discuss the nature of the claims/settling with a lawyer

[despritfreya]

CB,

Did you clear out your PM's so I can respond to the one from yesterday?

Des.

[justbroke]

PS: the trustee's attorneyh did say that I should have listed my countersuit and exemption and that she had a right to object based on bad faith, but then said she wassn't saying that is what she would do. But now that I know I should have put it on the schedules I'm afraid not to!!!!!!! The Trustee's A said it would be a lot easier if I had a lawyer...guessing this means she would discuss the nature of the claims/settling with a lawyer

You must list all lawsuits to which you are a party on the Statement of Intentions at a minimum. If you are the Plaintiff and are seeking a money judgment, you need to list the lawsuit on Schedule B with an amount of $0.00 and contingent. You may also claim an exemption on Schedule C if allowed. (Certainly your attorney fees, should they be awarded, be exempt, since they are not property of the Estate anyhow.)

I'm sure Des is providing you some information on how to proceed. I don't believe that the Trustee's attorney can settle for less than your valid expenses, but this is a precarious position. I too wish you had an attorney. Being a party to a lawsuit in which you may be awarded damages (actual and/or punitive), is very important to handle correctly when filing for bankruptcy. Trustee's love to earn "free" money.

[CoBelle]

Thanks Justbroke,
Will have to look where I DID put the lawsuit...I know I put it somewhere and the trustee admitted that I did. Yes, it would be 'free' money to her and the ESTATE and yes, I wish I'd not just copied what my lawyer did on the 13 (well i did make some changes). And finally, yes, DES has been giving me lots and lots of info...much appreciated and that is why my PM box is so full...I hate deleting info that you guys send to me!

Dang I actually thought I might get a wee bit of money out of their nuisance suit against me...not worried that 'they' can get anything as the judge already told them they were SOL and to settle. Gee, maybe I can claim the property damages as part of my homestead exemption that was stolen????HA!

[CoBelle]

Des, I cleaned out my PMs...sorry.
Hoping you can address the idea that Trustee must settle for at least my expenses and in re attorney fees already owing.

[gettinon]

Des, I cleaned out my PMs...sorry.
Hoping you can address the idea that Trustee must settle for at least my expenses and in re attorney fees already owing.

Bumping - what is the answer? Can the Trustee settle for less than full value of case?

[despritfreya]

Bumping - what is the answer? Can the Trustee settle for less than full value of case?

Without knowing what your situation is, in general, yes.

A Trustee uses his/her best business judgment. If settling for less than full value of the asset will be easier and less costly to the estate than attempting to secure full value a Court will most likely overrule any objection to the Motion to Compromise Settlement.

A debtor has little standing to oppose such a settlement unless it is clear that a Trustee is derelict in his/her duties. Further the debtor probably has to show that, without such dereliction, the estate would have been “solvent”, with a return of equity to the debtor.

If a debtor wishes to attempt to keep control of an asset then the debtor most likely should not be filing a Chapter 7.

Des.

[gettinon]

What is a Motion to Compromise Settlement?

[despritfreya]

What is a Motion to Compromise Settlement?

If a Trustee settles a dispute (as opposed to auctioning an asset), the settlement must be approved by the Court. The Trustee files a Motion to Compromise Settlement. The Motion and/or a Notice of Motion (depending upon local rules) is mailed to all creditors and interested parties. Depending upon local procedure the following will happen:

A. A hearing on the Motion is set and any objections to the Motion must be filed before the hearing. At the hearing the Judge will either approve or not approve the Motion or the Judge can request additional information.

OR

B. In jurisdictions that do not require a hearing, if no objection to the motion is received by a date certain the Judge will approve the Motion. If an objection is received a hearing is set and you are back to "A" above.

Des.

[gettinon]

If I object to the Motion and lose, do I have to pay the Trustee's attorney's fees? Generally, how much does the settlement have to be in order for the Trustee to make it worth his while to go through this process?

[despritfreya]

If I object to the Motion and lose, do I have to pay the Trustee's attorney's fees? Generally, how much does the settlement have to be in order for the Trustee to make it worth his while to go through this process?

While I cannot be absolutely sure, it is unlikely that you would be responsible for legal fees. Legal fees of the trustee will be paid by the bk estate therefore less $$ will make its way to the creditors. However, if you do something stupid (cannot define "stupid") you could be sanctioned by the Court. Rare but always possible.

Can't answer the second part. Just depends on the Trustee and how little he/she is willing to bring into the estate before walking away.

Des.