Sued a company, they filed for bankruptcy 3 days later, still got a default judgment!?

[beekrock]

What is the name of your state? PA

I recently sued a large NY-based company in a PA small claims court. A mere three days after I filed, the company announced Chapter 11 bankruptcy. I figured, “Oh, well. now I’m out my filing fee AND what they owe me!”. To my surprise, though, a month later I received notification of a default judgment in my favor from the court.

My questions are:

1. If the company is in bankruptcy, why wasn’t the suit stayed?
2. Since it wasn’t stayed and I now have a judgment, am I actually able to execute on the judgment?

 

[adjusterjack]

1. If the company is in bankruptcy, why wasn’t the suit stayed?

Probably wasn't on the BK court radar.

2. Since it wasn’t stayed and I now have a judgment, am I actually able to execute on the judgment?

Probably not. I believe that your judgment was discharged even if it wasn't listed.

 

[Litigator22]

What is the name of your state? PA

I recently sued a large NY-based company in a PA small claims court. A mere three days after I filed, the company announced Chapter 11 bankruptcy. I figured, “Oh, well. now I’m out my filing fee AND what they owe me!”. To my surprise, though, a month later I received notification of a default judgment in my favor from the court.

My questions are:

1. If the company is in bankruptcy, why wasn’t the suit stayed?
2. Since it wasn’t stayed and I now have a judgment, am I actually able to execute on the judgment?

"Since it wasn't stayed". . .?!

How about the instant the Debtor's petition was filed?

 

[Taxing Matters]

My questions are:

1. If the company is in bankruptcy, why wasn’t the suit stayed?

The filing of the bankruptcy petition has that effect, even though the small claims court apparently never got notice of the lawsuit. And PA small claims courts are run by elected district court magistrates who don't have to be lawyers, so it may be the judge wouldn't have known what to do even if he/she did get notice.

2. Since it wasn’t stayed and I now have a judgment, am I actually able to execute on the judgment?

The judgment is likely no good because the federal court's actions would supercede the state district court. You knew of the bankruptcy and if you try to execute without first checking to see the outcome of the bankruptcy it is possible you could be subject to sanctions. So I suggest you not go off half-cocked and charge off trying to attach assets without first verifying you can do so. A quick consultation with a bankruptcy lawyer might be a good investment in that regard unless the judgement is really small, in which case it really won't be worth your time and effort.

 

[quincy]

What is the name of your state? PA

I recently sued a large NY-based company in a PA small claims court. A mere three days after I filed, the company announced Chapter 11 bankruptcy. I figured, “Oh, well. now I’m out my filing fee AND what they owe me!”. To my surprise, though, a month later I received notification of a default judgment in my favor from the court.

My questions are:

1. If the company is in bankruptcy, why wasn’t the suit stayed?
2. Since it wasn’t stayed and I now have a judgment, am I actually able to execute on the judgment?

How was the bankruptcy “announced” to you by the company? Do you know if the company actually filed for bankruptcy?

 

[beekrock]

How was the bankruptcy “announced” to you by the company? Do you know if the company actually filed for bankruptcy?

I was notified via email. It’s a very large company, too, so their bankruptcy was very public & in the news.

 

[quincy]

I was notified via email. It’s a very large company, too, so their bankruptcy was very public & in the news.

Thanks for answering my questions, beekrock.

If in fact a petition for a Chapter 11 bankruptcy was filed and the amount you are owed is substantial, you might want to consult with an attorney in your area. You do not want to miss the deadline for filing a claim.

 

[zddoodah]

I recently sued a large NY-based company in a PA small claims court. . . . To my surprise, though, a month later I received notification of a default judgment in my favor from the court.

I've never heard of a court issuing a default judgment only a month after a case is filed. I'd be awfully skeptical that a judgment was actually entered.

If the company is in bankruptcy, why wasn’t the suit stayed?

Well...how would the PA small claims court know about the BK? Upon learning of the BK, did you file a notice to that effect? Did you serve the papers regarding your lawsuit on the defendant? If the defendant didn't know about your lawsuit, then it would have no reason to know to notify the court about the BK.

Since it wasn’t stayed and I now have a judgment, am I actually able to execute on the judgment?

Again, I'm skeptical that you actually have a judgment. However, if you do, then you would be violating the automatic stay (the one that resulted from the filing of the BK) if you took any action to enforce the judgment without first obtaining permission from the BK court.

I believe that your judgment was discharged even if it wasn't listed.

Corporate debts are not discharged in BK (even if it's a Ch. 7 case), and the defendant filed a Ch. 11 case, which is a reorganization (and which also does not result in the discharge of debt). We can't possibly know from here how the OP's alleged debt has been or will be handled in the BK.

 

[quincy]

In other words, we do not have enough information because Beekrock doesn’t have enough information yet. Beekrock would benefit from an attorney’s personal review.