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Bankruptcy Strategies for Dealing with Litigation

| Sep 15, 2021 | Bankruptcy, Bankruptcy, Debt, Debt, Litigation

If you or your company is facing a sizable lawsuit, then you may be considering various bankruptcy options. First, if a judgment has already been entered, you will need to decide if you plan on appealing the judgment or not. For many, an appeal means posting a bond which is simply not feasible. If you are unable to satisfy the judgment and are not planning an appeal, then a personal or corporate bankruptcy may be a viable option.

The goals you have for your personal or business affairs will help to determine which chapter of bankruptcy is appropriate for you. If you are looking to close your business or do not have significant personal assets at risk of loss in a bankruptcy, then a personal or corporate chapter 7 may be ideal if there are no fraud or similar findings. Please note that fraud and other similar grounds are a basis to object to discharge of the debt and possibly the receipt of a discharge in general. If you have significant personal assets you want to protect or are looking to reorganize your business, then an individual or corporate chapter 11 bankruptcy may be the best option. In a chapter 11 bankruptcy, the judgement can be paid over several years and in many cases receive cents on the dollar. If a judgment has not yet been entered, you may find that legal fees are preferably spent on the bankruptcy reorganization as opposed to continuing the litigation in other courts. Due to recent changes in the bankruptcy law regarding reorganization of small business cases, it is now easier to get contested bankruptcy plans approved in small business chapter 11 cases.

One thing to note when evaluating bankruptcy as a strategy for dealing with litigation is that your bankruptcy filing may be attacked and dismissed as a “bad faith” filing if the sole purpose of the bankruptcy is to avoid the litigation or payment of the judgment. If you have few other creditors, it may be appropriate to file a bankruptcy plan at the outset of the case with your initial bankruptcy filing to demonstrate that you are trying to satisfy the judgment and any other creditor claims and not utilizing the bankruptcy filing solely as a delay or litigation tactic.

About DelCotto Law Group

DelCotto Law Group is Kentucky’s asset protection law firm known for its commitment to the lifetime success of its clients. With offices located in Lexington, Louisville and Danville, DLG serves Kentuckians with complicated financial matters, especially in the areas of bankruptcy and complex litigation. For more information please call (859) 231-5800, email [email protected] or reach us on our contact page.