If you are thinking about filing bankruptcy and are mixed up in or will soon be involved a lawsuit, you need to tell this information to your bankruptcy lawyer prior to when your case is filed. Any damages received from the lawsuit are property of your bankruptcy estate and must be listed as an asset on your bankruptcy schedules. The good news is, that depending on how much you are awarded, there is a good chance that you may exempt the award depending on what your state exemptions say. In Washington State, you may apply a wild card exemption or even a personal injury exemption to your assets. Your bankruptcy law firm can advise you on whether this asset would be protected in your case as amount of protection would vary on a case by case basis.
If you are suing somebody that means you don’t have anything yet, but you still have to list the lawsuit as a potential asset. If you are considering filing a lawsuit, it is possible that the opposing party will find out at some point that you have filed a bankruptcy. Then what will happen? The opposing party may tell your bankruptcy trustee. Your bankruptcy trustee may then reopen your bankruptcy case and you may lose your bankruptcy discharge. Even if the lawsuit results in enough money to pay your creditors, your failure to list the lawsuit on your bankruptcy schedules will be used against you.
So if you are filing a bankruptcy case, it is always advisable to list all your assets, including lawsuits. It includes any claims you have even if you don’t know what damages you may be awarded. It includes any claims you have even if there are significant defenses to the suit. It is always advisable to play it safe when dealing in court matters and your bankruptcy case. Don’t take any chances, just list the claim.
If you have additional questions and need to schedule a free consultation please call 206-682-7975