Suing a Tortfeasor Who Files for Bankruptcy
Imagine a dad is driving his new 2017 Lexus home from work on the I-75 after a long day. While driving, a car comes out of nowhere and rear-ends the dad’s car, causing it to spin and smash multiple times into a guard rail. An ambulance rushes to the scene, where paramedics pull the dad from the car and place him on a stretcher. They take him to the hospital to be treated for multiple fractures.
Meanwhile, the police investigate the scene of the accident. The dad’s car is a total loss; skid marks and eyewitness accounts point to the driver of the other car as the culprit. The police officers take the tortfeasor to the police station for questioning. He is later released.
The dad goes to his lawyer, who files a lawsuit against the tortfeasor for damages. The plaintiff/dad requests damages for his car and his injuries, with a cost close to $1 million. The defendant/tortfeasor pleads not guilty. During discovery, the plaintiff finds that the defendant does not have car insurance.
The case progresses to trial. The jury awards the plaintiff $1 million. Immediately thereafter, the defendant files a bankruptcy petition in the United States Bankruptcy Court for the District of Georgia. The defendant’s bankruptcy schedule lists numerous creditors, including the plaintiff and his $1 million claim.
Bankruptcy Stay and Discharge
Two main features of the United States Bankruptcy Code are the automatic stay and discharge. The automatic stay acts to stop all pre-petition collection, which is debt incurred before filing for bankruptcy. In other words, creditors are generally barred from collecting debts owed until the completion of the bankruptcy process.
The other main feature is the discharge wherein a debtor who satisfies the requisite criteria can wipe out debt. In general, secured creditors have a distinct advantage under the bankruptcy process that allows them to collect their debts in full before unsecured creditors are repaid. Often, secured creditors collect something whereas unsecured creditors collect nothing.
In the above scenario, the defendant would be able to stay collection during the course of the bankruptcy and discharge the debt at the end of the bankruptcy process.
Bankruptcy Filing Prior to the Judgment
If, however, the defendant, files for bankruptcy before the jury awarded the plaintiff $1 million, he or she would not be able to discharge his $1 million debt to the plaintiff through the bankruptcy. This is because the plaintiff did not become a creditor to the defendant until the trial ended and the defendant filed for bankruptcy when the plaintiff was not a creditor, the defendant cannot stay the claim and discharge his debt to the plaintiff through bankruptcy.
Willful Torts
If, in the above scenario, the defendant willfully hurt the plaintiff, then the defendant cannot discharge his debt to the plaintiff through bankruptcy. The Bankruptcy Code expressly excludes willful torts from discharge. Thus, even if the defendant files for bankruptcy after a jury awarded the plaintiff, there would be no discharge.
Contact us
If you suffered injury due to a car accident, contact the car accident attorneys at Williams Elleby Howard & Easter. If you have questions or would like to discuss your case, please call our office today at 833 – LEGALGA for a free consultation.
