Chapter 7; Should I wait and see what happens with my lawsuit?

[lotsahats]

Hello.

I desperately need to be relieved of credit card debt, and am considering filing for Chapter 7. The problem is, I am being sued because of a car accident I was in a little over a year ago. Everybody seems confident that the plaintiff will settle with the insurance company, rather than drag me to court, since suing me would be like trying to squeeze blood from a turnip. But, in the event that the plaintiff does drag me to court, I'll need to list this person as a creditor.

My question is this: Am I supposed to wait and see what happens with this lawsuit before I file, and high-tail it to a bankruptcy attorney as soon as the trial is over, or can I go ahead and file, list the plaintiff as a "possible" creditor, and explain that I might be sued? How does that kind of thing work? I really need to file sooner, rather than later, but I need to make sure the lawsuit is discharged along with the rest of my debt.

Also, what becomes of your tax refund after filing Chapter 7 in the state of Tennessee? I've Googled it to death, but haven't been able to find anything. I know that in some states, the trustee takes it, and on others, he doesn't.

Any help will be much appreciated.

[AngelinaCatHub]

All lawsuits to and from you are tolled (stopped in place) until after your discharge. I am not sure about the fact that your insurance company represents you as a separate entity or not. You pay insurance to have them fill in for you and pay the settlement. Have you been sued personally? If you bk it just may drag all out to the end and then you would be stuck with the Judgment if the suit is won for more than the amount of insurance coverage. This could be discharged in BK since it is not a fine or tax.

Depending on when you get your tax return and what you use it for, if you file before you receive it, it is part of the BK estate. Do not spend it. 'Hub

[lotsahats]

Thanks, Angelina.

I'm still a little confused, though. (Sorry, I'm new at this bankruptcy thing. Please bear with me.) Just to make sure I'm understanding you correctly...you're saying that, even if I go ahead and file now, and list the plaintiff as a potential creditor, the lawsuit wouldn't be discharged?

If that's the case, then I should wait and see what happens, because I can't afford the lawsuit, any more than I can afford this credit card debt.

To answer your question, yes, I'm personally being sued. In my state, if an insurance claim isn't settled within a year, then the claimant must file suit to keep the claim open.

[AngelinaCatHub]

Thanks, Angelina.

I'm still a little confused, though. (Sorry, I'm new at this bankruptcy thing. Please bear with me.) Just to make sure I'm understanding you correctly...you're saying that, even if I go ahead and file now, and list the plaintiff as a potential creditor, the lawsuit wouldn't be discharged?

If that's the case, then I should wait and see what happens, because I can't afford the lawsuit, any more than I can afford this credit card debt.

To answer your question, yes, I'm personally being sued. In my state, if an insurance claim isn't settled within a year, then the claimant must file suit to keep the claim open.

Yes, that is what I am saying. However, in that you are bankrupt, this could reflect a lot on this suit. They may sue you, and get a Judgment, but if they cannot collect, what is the use? However that being said, if you become wealthy in the future, a Judgment could then harm you. It is better not to get one. I would hurry the trial. When was the last action in this case? If nothing more than ten months, you can Motion the Court for dismissal for lack of prosecution. If you were insured, they have a legal obligation to be your defense. I'm in FL but my bro is in TN. I watched one of these happen in my bro's case. He won as the Plaintiff took the max on insurance. Case closed.

As stated, it may be better to clean this up, but there is also a pro-con situation in this. Understand, the case is NOT closed in BK only stalled.

I am going to ask one of our star members to chime in on your case if I may. 'Hub

[despritfreya]

lotsahats,

I was asked to look at this thread. Assuming there was no DUI (or willful misconduct) involved, the accident claim is dischargeable and you list the claimant, the claimant's insurance carrier (if any), your insurance carrier (for info only) and any attorneys that may be involved.

HOWEVER, the injured party has the absolute right to seek recovery from your insurance carrier. To the extent that insurance does not cover the entire claim, the injured party will not be able to collect from you since the claim will be discharged (again, assuming no DUI or willful misconduct).

If you file bk before the claim settles, here is what should happen.

1. Automatic Stay goes into effect thus stopping any pending state court litigation.
2. If the injured party's attny is smart enough he will immediately contact your attorney seeking a stipulation to lift the stay for the sole purpose of establishing liability. The stipulation should state that the injured party will not seek money from you and will only make a claim against the 3rd party insurance carrier.
3. To the extent necessary you will need to cooperate if the matter goes to court or the other side needs to take your deposition as you become a "witness". So long as the other side stipulates that it will seek recovery from insurance only you should not oppose this.

This situation happens all the time and, in the instances that I have dealt with it, such has never been a big deal.

Des.

[lotsahats]

Thanks, Des. It could be at least another year before this case goes to trial (assuming the plaintiff doesn't settle), so it's good to know I don't have to wait. I need to file BK, like, NOW.

Thank you, Angelina!

[lotsahats]

If you file bk before the claim settles, here is what should happen.

1. Automatic Stay goes into effect thus stopping any pending state court litigation.
2. If the injured party's attny is smart enough he will immediately contact your attorney seeking a stipulation to lift the stay for the sole purpose of establishing liability. The stipulation should state that the injured party will not seek money from you and will only make a claim against the 3rd party insurance carrier.
3. To the extent necessary you will need to cooperate if the matter goes to court or the other side needs to take your deposition as you become a "witness". So long as the other side stipulates that it will seek recovery from insurance only you should not oppose this.

UPDATE: Well, it appears as though the claimant is not willing to settle. I just received a letter stating that a trial date has been set. Fortunately, I was already planning on filing C7 well before then.

So, now that a date has been set, what happens now? I'm pretty sure that, even though I will be filing C7, the discharge won't happen before the date of the trial. Will they have to postpone trial? Or, will they be forced to handle things outside of court?

BTW, it isn't in state court, it is in my county's circuit court. Does that make a difference?

Should I call my defense attorney, and inform him that I intend to file bankruptcy?

What happens if the plaintiff's attorney isn't "smart enough" to contact my bankruptcy attorney? (He probably is, though.)

[despritfreya]

Does not matter that it is a Circuit Court. Procedure is the same. If you file bk before the trial you must notify the other side and the Circuit Court. The stay will go into effect the moment you file bk and nothing further will happen in the Circuit Court until the stay is lifted - this includes any further attempt to settle with the insurance company or establish liability by holding the trial.

If you are sure you are filing bk and know when you will file then, by all means, let your defense attny know. However, telling him you are filing and actually filing are 2 different things.

If the other attny is not smart enough, he will eventually contact his malpractice carrier if he does nothing to protect his client's right to recover from the insurance.

Des.

[lotsahats]

Thanks, Des.

So, just to make sure I understand correctly, (1) the only way the stay can be lifted is with the stipulation that the other side does not attempt to collect anything from me, and (2) as long as there was no willful misconduct (and I can assure you, there wasn't) there is no reason that the accident can't be discharged.

Somehow, I get the feeling that the plaintiff is out to get me, regardless of the fact that they're trying to squeeze blood from a turnip.

[despritfreya]

I have handled numerous cases where there was a personal injury claim (typically from an auto accident) with no allegation of willful and malicious conduct. All we did was stipulate for the finding of liability and payment by a 3rd party. Never had an issue with the request or the Motion to Lift the Stay if not done by Stipulation, so long as creditor agreed not to seek payment from my client. If you have an attny for your bk he/she should know how to proceed as it relates to this issue.

Des.

[lotsahats]

I have handled numerous cases where there was a personal injury claim (typically from an auto accident) with no allegation of willful and malicious conduct. All we did was stipulate for the finding of liability and payment by a 3rd party. Never had an issue with the request or the Motion to Lift the Stay if not done by Stipulation, so long as creditor agreed not to seek payment from my client. If you have an attny for your bk he/she should know how to proceed as it relates to this issue.

Des.

Thanks, Des.

[AngelinaCatHub]

I could only think of one problem "perhaps". Could the Plaintiff accuse our OP of filing a constructive BK for the purpose of avoiding the trial? Knowing what I went through with my enemy, the possibility of this attempt could be attributed to fraud. A stay for trial allowed.

Not to upset our OP, and I doubt this would happen, but the possibility of the attempt could be made. This forum post dates back to August but yet he has not filed. It is evidence in two directions. His intent to file, yet he has not to date. 'lotsahats" I would get on it now and file. Get this over as time is your friend. 'Hub

EDIT: This DID happen to me, and an AP was filed against a not yet run civil case that my enemy desired to go criminal and what a better way to bring it to a Federal Court. If I had lost, it would have gone upstairs to the Federal Criminal Court. We as pro se went to his lawyer, who actually agreed with us that a stipulation to toss it back to the State Civil Court and it's determination would be not discharged in my BK.

You name it, it happened to us. Both cases where later dismissed for lack of prosecution. The suit was five years old. He just wanted to bleed me broke. He did a fine job of it. 'Hub

[despritfreya]

Hub,

Sounds like someone attempted to remove the litigation against you to the bk court (or, more properly the Federal District Court) and that all parties agreed to remand it back to state court (where it belonged), allowing the bk court to ratify the final ruling if it rose to the level of a 523.

The reality is that bks are filed to stop something. Filing on the eve of a trial is not per se "bad faith". There are many factors that determine a bad faith filing and the timing is only one of them. It is a balancing test. My district calls these factors, which are not all inclusive, "The Warren Factors".

OP's issue appears to be a typical car accident and not arising out of some transaction that causes personal hatred (and vindictiveness). Assuming it is a typical accident OP should be fine.

Des.