Bankruptcy and pending litigation
I’am a party to a lawsuit which is winding it’s way through our legal system. I expect to gain a large sum of money if I win the lawsuit. I don’t expect the lawsuit to be resolved anytime soon though.
If I declare bankruptcy now do I have to inform the trustee about the pending litigation? Can I still be party to the lawsuit or should I sign my rights over to the trustee?
Since I’am a first time bankrupt with very little surplus income I expect to be discharged in nine months well before the resolution of the lawsuit. Will the presence of the lawsuit delay my discharge?
If I win the lawsuit AFTER my discharge from bankruptcy am I expected to turn over the money to the trustee? Or is it mine to keep?
First, you are legally obligated to disclose this lawsuit to your trustee and failure to do so would be considered fraud and may result in someone being ineligible for a bankruptcy discharge.
When you file bankruptcy your interest and ability to pursue automatically defaults to your bankruptcy estate, meaning your trustee and ultimately your creditors decide the fate of this lawsuit. If they perceive there is any value to the law suit then they will choose to pursue it and may keep the bankruptcy open long enough to do so, or alternatively if they think it is a long shot and are not willing to fund it they could essentially hand the reins back to you.
This is really a difficult issue to discuss generally and you should contact a licensed trustee and discuss the nature and potential ramifications of this lawsuit specifically.