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Ely
Ely, Counselor at Law
Category: Bankruptcy Law
Satisfied Customers: 102584
Experience:  Licensed attorney in private practice.
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I was pulled into a federal lawsuit as a third party

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I was pulled into a federal lawsuit as a third party defendant over copyright image issue. I need to file for BK as I can't afford to defend myself anymore and have some questions about this process and how to handle it.

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I am sorry to hear about this situation. What exactly is your question here, i.e. steps on how to file for bankruptcy, or, something else?

Customer: replied 6 months ago.
Attached is the lawsuit was I was pulled into as a third party defendant. I received conflicting information from some local bankruptcy lawyers about the charges against me. I need to file BK and need to know if these counts would be considered dischargeable. See attached

I understand the confusion. Here is the fast answer - a judgment under this would be considered dischargeable, but not if it includes a judgment based on FRAUD. You see, the suit mentions several causes of action.

To sue in a court, one needs to have a "cause of action." There are numerous causes of action, such as "breach of contract," "negligence," "fraud," "unjust enrichment," etc., as well as causes of action rooted in statutory law. Every state has their own although they are very similar to each other in every state because they all stem from the same common law. A pleading in Court needs at least one cause of action, although it is not unusual to have more than one.

Here, there are several - breach of contract, warranty breach, fraud, etc. It is the fraud (or here, fraudulent misrepresentation) which matters. If the party gets a judgment based on the other causes of action - it can be discharged in a BK. However any judgment based on FRAUD cannot. So one wants to avoid a judgment based on fraud because such a judgment CANNOT generally be discharged by a BK.

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Customer: replied 6 months ago.
You are totally fine, no worries. I am married with three young children and very confused right now. This is what another BK lawyer told me about the fraud count - If you file for BK now, an automatic stay will be imposed on the State court case. The parties there will have to apply to the BK court to lift the stay. The defendant will then need to file an adversary proceeding in the BK court to determine whether his claim for fraud against you can be discharged. If he fails to do that within 60 days of the first meeting of the creditors, then the defendant's claim against you is still dischargeable. Further, it is "debts" obtained through fraud that are not typically dischargeable. So, even if there is a fraud judgment against you it does not mean that it is not dischargeable. Best bet is to file BK sooner rather than later and make the defendant prove the fraud to the BK court.

This is what another BK lawyer told me about the fraud count - If you file for BK now, an automatic stay will be imposed on the State court case.

Correct.

The parties there will have to apply to the BK court to lift the stay.

Correct.

The defendant will then need to file an adversary proceeding in the BK court to determine whether his claim for fraud against you can be discharged.

Correct.

If he fails to do that within 60 days of the first meeting of the creditors, then the defendant's claim against you is still dischargeable.

Correct.

Further, it is "debts" obtained through fraud that are not typically dischargeable.

Correct.

So, even if there is a fraud judgment against you it does not mean that it is not dischargeable. Best bet is to file BK sooner rather than later and make the defendant prove the fraud to the BK court.

Correct. Whoever you got your consult from knows their stuff. They are on the ball there. And yes, the sooner the BK is filed, the better (in regards ***** ***** discharging, if the other party manages to file the adversary proceeding in time).

Gentle Reminder: Please, use SEND button to keep chatting, or PLEASE SELECT THREE OR MORE STARS and click FINISH to submit your rating when we are finished. You may always ask follow ups at no charge after rating.

Customer: replied 6 months ago.
I was going to file BK right when this started and when I called my attorney he kind of flipped out and said I should be filing "after" the lawsuit is over. Problem is I am 3 months into this and have spent 20k and we haven't even gone to mediation yet. The only reason I am trying to stay in this lawsuit is to protect me from any long term judgements. But if my chances of getting out now is better than running up a 60-70k lawyer fees I'd much rather do that. Just scared I'm gonna make the wrong choice

I see. Normally, it is better to file AFTER a judgment. However, in a lawsuit where there is an allegation of fraud, it is better too file BEFORE, because there is no judgment for fraud, yet, and therefore the matter stands a better chance of being discharged.

However, this is simply MY opinion. Other experts/attorneys may disagree. Listen to your attorney because he knows the intricate facts of the case better than I do. I do not mean to be ambiguous, but the simple fact is a lot of times, the answer is "it depends."

Gentle Reminder: Please, use SEND button to keep chatting, or PLEASE SELECT THREE OR MORE STARS and click FINISH to submit your rating when we are finished. You may always ask follow ups at no charge after rating.

Customer: replied 6 months ago.
my lawyer has a BK attorney on staff, if I decide to file BK before should I go through his law firm or do this on my own? I didn't want any bad blood between my lawyer and me and didn't want any backlash for dropping out of the case I just need to do what is best for me and my family.

I would go through his firm, because the firm is already familiar with the suit. So it makes sense to simply go with their firm - saves "catch up" time.

Gentle Reminder: Please, use SEND button to keep chatting, or PLEASE SELECT THREE OR MORE STARS and click FINISH to submit your rating when we are finished. You may always ask follow ups at no charge after rating.

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