Bankruptcy Chapter 7 debt relief and lawsuit

[MartinesM12345]

Illinois

I lost my Job in January I have used my savings, 401K, to keep us a float for the last few month. Money is running out and I have not found a job. After careful consideration we are exploring filing bankruptcy chapter 7. We know we qualify for chapter 7 based on the debt we have, like credit cards, medical bills, car loans, personal loans, student loans, tax debt all over $80,000 dollars.

I have not been able to get a job because having a non-compete from my ex-employer. I am currently contesting the non-compete in court however if I lose my employer could come after me for their legal fees. On top of this I have a potential for a frivolous civil lawsuit from an employee for emotional distress.
We understand that there are debt is nondischargeable like student loan, taxes, etc. If we filed BK chapter 7 could it protect us from my employer suing me for legal fees if I lost my case with my employer? Second if the employee does file a lawsuit does chapter 7 offer any protection. If I file BK next month and the case with my employer and my employee take 6-12 month to finalize can they be added to the BK?

 

[adjusterjack]

I suggest you ask all those questions of a bankruptcy attorney who can go over your details more thoroughly than can be addressed here.

 

[quincy]

FreeAdvice has a bankruptcy attorney who posts to this forum. Although I agree with adjusterjack that you will want to go over details with a bankruptcy attorney in your area, you might want to check back here for any comments that might be posted by "despritfreya."

 

[despritfreya]

You are contesting the validity of the non-compete provision in State Court and are asking that, if you lose the argument, will the legal fees assessed against you be discharged.

1. Valid non-complete provisions are enforceable regardless of bankruptcy.

2. Legal fees incurred PRIOR to the filing of bk should be subject to a discharge. There are exceptions such as fees assessed due to some wrongdoing during litigation and even that depends upon case law in your district.

3. If litigation has not been concluded prior to filing a Chapter 7, your rights, as the Plaintiff, transfer to the Trustee and the Trustee becomes the true party-in-interest. Unless there is some exemption protecting the cause of action you will not be in a position to continue to litigate the validity of the non-compete provision and you will be stuck with its enforceability.

4. If litigation has not been concluded prior to filing a Chapter 13 or 11 you will continue to control your rights as a Plaintiff and, with the bk court's "permission", you may continue to litigate. If you lose, you may be stuck with the legal fees the other side incurred after the date you filed bk. This will depend upon case law in your district.

Your next step is to consult with a well qualified bk attny who understands the enforceability of non-compete clauses as it relates to bankruptcy and your wish (should you have one) to continue to litigate the issue (if not concluded) after you file bk.

Edt to add. . . the suit by the employee for "emotional distress" will be stayed when you file bk. The Plaintiff (employee) could file a non-dischargeability complaint in the bk so, while the State Court action will be stayed, your issue with this person may not be over.

Des.