Any active or potential lawsuits against a third-party must be disclosed to the US Trustee in both chapter 7 and chapter 13 bankruptcy. This includes any potential claims, even if you have not retained an attorney yet to pursue the claim.
Your bankruptcy attorney will have to exempt these potential claims. If the value of the claim goes beyond your ability to exempt it in bankruptcy, some of the claim may go to pay your unsecured creditors. Smaller claims should be fully protected.
This includes a large range of potential recoveries, including personal injury, medical malpractice, employment discrimination, and other potential claims against property.
The trustee in your bankruptcy case may even keep your case open until the claims are settled in full. This This could delay your case being closed out and discharged. Therefore, it is sometimes advisable to let the claim play out before filing bankruptcy.
If a potential lawsuit occurs during the duration of your bankruptcy, you will need to notify your attorney so that they can notify the trustee. If potential claim or lawsuit develops during a chapter 13 bankruptcy, your attorney will also need to have the attorney involved in filing the claim be approved by the bankruptcy court. While this is normally just a technicality, it is still required. Any attorney hired during a Chapter 13 bankruptcy must be approved by the bankruptcy court.
If you have a potential lawsuit against someone else, and you are considering filing a bankruptcy, you should speak with an experienced bankruptcy attorney to determine how filing bankruptcy will affect the claim and whether or not you will be able to keep some or all of the potential proceeds. With the lawsuits or claims involve smaller amounts, most likely you will get to keep everything. However, you should still notify your bankruptcy attorney just to be safe.
If you have any questions about lawsuits and bankruptcy, call us at 412-414-9366. I would be happy to discuss your situation and answer any of your questions.