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Terry L.
Terry L., Attorney
Category: Bankruptcy Law
Satisfied Customers: 2815
Experience:  Better Business Bureau. 18yrs bankruptcy experience. Chicago Bar Assoc. American Bankruptcy Institute member.
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Im an attorney and a client needs advice on some bankruptcy

Customer Question

I'm an attorney and a client needs advice on some bankruptcy issues: 1. He's been sued for fraud. BK will put a stay on the action, thereafter, where is the lawsuit heard if the stay is lifted? 2. His wife has 100k in a SEP IRA. Is that exempt from his creditors? 3. He's a sole proprietor and has about 100k in business credit card debt. Is this dischargeable in his 7 proceeding?
Submitted: 7 years ago.
Category: Bankruptcy Law
Expert:  Terry L. replied 7 years ago.
Hi there.
1. Bankruptcy will stay all action. The creditor would then need to file an adversary in bankruptcy court to determine the dischargeablity of the debt. They can obtain the judgment thru bankruptcy court. Fraud is normally non-dischareable.
2. Yes, the SEP-IRA is exempt from the creditors.
3. Business credit card debt is normally dischargeable in a personal bankruptcy for any personal liability or personal guarantees there may be. The corporation is still liable for the debt however, even if the individual files bankruptcy. Of course creditors can object for fraud etc. but that has to be done through an adversary proceeding in the bankruptcy case.
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Customer: replied 7 years ago.

Thanks. Would the fraud action in state court be moved to the bankruptcy court or would it be tried in the state court?

Expert:  Terry L. replied 7 years ago.
Well, the adversary objection would have to be filed in the bankruptcy court. If the creditor can prove the debt falls within the fraud section of the bankruptcy code. sections 523(a)(2), (4) and(6), and is ordered nondischargeable, they can then enforce the order through normal non-bankruptcy channels, garnishment, freeze bank accts etc.

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