Can I sue a business if it goes bankrupt?
The most significant difference between suing a firm during bankruptcy and other lawsuits is that the bankruptcy adds an extra layer of judicial oversight at the beginning and finish of the case. However, there are regulations that will impact how you litigate the case, so you must be aware of them. If you don’t comply, you risk losing your ability to pursue the case or, worse yet, the court may find you in contempt of court.
The automatic stay protections stipulated by law are the effects of a firm filing a bankruptcy case that are most noticeable right away. Creditors are prohibited from taking any action to collect debts after the petition is filed. Automatic stay protections also halt any lawsuits that have been brought against the business and prohibit the filing of new litigation.
If you want to sue the company even though it’s bankrupt, you’ll need to file a motion to lift the automatic stay with the bankruptcy court.
The judge more often than not declines to lift the stay. Typically, the only way it will be lifted is if you can show the company falsely filed for bankruptcy, perhaps just to get out of your lawsuit. Before submitting any motions, be careful to discuss them with your lawyer so you can determine whether the judge will allow them and whether it will be worthwhile for you to spend your time on them.
By submitting a proof of claim to the bankruptcy court after learning of the defendant’s bankruptcy, you can defend your interests in suing the business. If the company already has a judgment against it, you will need to provide the bankruptcy court with evidence that the company owes you money in order to collect any funds from the bankruptcy estate.
Remember that many of the other debts owed by the company, including the one you are suing, may also be discharged. If this is the situation, you’re virtually screwed and might not be able to file another lawsuit against the business. For more detailed guidance, make sure you speak with an attorney about your legal alternatives.