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cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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This is a question involving Chapter 11 bankruptcy. The basic

Resolved Question:

This is a question involving Chapter 11 bankruptcy. The basic facts, without "naming names" is this. Debtor Company commits malicious prosecution in Alabama, or at least it will be an action for such when the underlying case is dismissed. Debtor Company then files Chapter 11 in New York. Questions are: (1) is a malicious prosecution claim even one that can fall under the Ch11 umbrella of protection; (2) does the malicious prosecution plaintiff have to file for a motion to lift the stay in NY to proceed in Ala in fed court on the malicious prosecution claim or does this have to be handled as an adversary proceeding inside the chapter 11 case? Thank you in advance for your assistance...
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 5 years ago.

cfortunato :

Hi JACustomer,


cfortunato :

There are 19 types of debts that are not dishargeable in any Bankruptcy - including a Chapter 11.


cfortunato :

Can it be claimed that the malicious prosecution was based on false pretenses?


Customer: replied 5 years ago.
I think so...specifically, the Chapter 11 Debtor Company, in short, brought a foreclosure suit against a resident in 3 different cases, some of which was on property that was not even financed by Debtor Company, they had no interest in the land, really beyond negligent, reckless stuff...If they did not specifically know beforehand, they without question should have known what the facts really were and that is going to evidenced by dismissal in 2 of the cases (one of them was correct)...convoluted fact scenario...
Expert:  cfortunato replied 5 years ago.

1) If you can convince the Bankruptcy court that this claim is based on fraud or false pretenses, or that the malicious prosecution was willful (negligent is not sufficient), then you will be able to have this claim determined to be non-dischargable. ("Willful" means the company did actually know they were acting in error, "negligent" means they did not know, but should have known.)

2) A motion for relief from the automatic stay would have to be filed in the New York Bankruptcy court - based on the fact that the claim is non-dischargeable. The malicious prosecution case would not proceed in the Bankruptcy court, it would have to be prosecuted outside of Bankruptcy court.

I think this is what you wanted to know. If not, please let me know.
Thank you.

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