What can I do if I sued someone for owed money but case was not heard yet and the person I am suing declaring chapter 13 BK

[txhomeowner2]

What is the name of your state? TX

A contractor, which I paid 90% of the total cost of the building he was working on, stiffed me and I had to fire him. I sued for half of what I paid him (very generous offer on my part as he did much less than 50% of the job). I filed a small claims case for $15,000 at his local country court. This was back in October of 2023. My case is not scheduled to be heard yet and court clerk says it will not be heard until mid-may and then some as the schedule after mid may is not out yet.

Meanwhile, I received a bankruptcy court notice about his chapter 13 BK case. I have never been subject to one of these and I don't know if I have any recourse against his debt to me not getting discharged as a result of his BK case. Amount is not high enough to hire an attorney. Hence my question here. Is there anything I can personally do myself to prevent his potential/alleged debt to me not getting discharged ?

Thanks

 

[Taxing Matters]

Well, first thing to know is the the filing of the bankrutpcy petition results in an automatic stay that prohibits creditors from pursuing collection until the bankruptcy is over or the bankruptcy court lifts the automatic stay. The contractor may inform the small claims court of the bankruptcy but if he doesn't, you probably should because continuing the lawsuit may put you in violation of the the automatic stay. The small claims court will either suspend the case pending the outcome of the bankruptcy or simply dismiss it without prejudice. That means you can file it again later if the bankruptcy doesn't result in full payment or a discharge. The bankruptcy will extend the statute of limitations for you to pursue the lawsuit if his Chapter 13 falls apart and he doesn't convert it to a Chapter 7. So for the time being that places you in a waiting game while the court sorts out all the claims and determines whether the debtor qualifies for a Chapter 13 plan and what that plan will look like.

You'll need to ensure that you file your claim with the bankruptcy court timely, no later than 90 days after the date set for the first meeting of creditors. If you don't file timely your claim won't be considered at all and you'll likely end up getting nothing. You will be an unsecured creditor, which puts you in a a pool of creditors that have the lowest priority to get paid. But the details of the bankrupt person's assets matter. Chapter 13 is a bankruptcy in which the debtor files a plan to pay the debts owed over a period of time, up to five years. In some Chapter 13 cases that results in all creditors getting fully paid in an organized manner; if the plan can't pay off all the debts, then at least the plan will give the creditors part of what they are owed without having to race against each other to try to grab assets before some other creditor does. At least that doesn't force you to scramble to get the judgment and start racing around to attach assets to beat the other creditors. You may find the explanation of Bankruptcy Basics on the U.S. Court System website helpful in understanding the process.

 

[txhomeowner2]

Well, first thing to know is the the filing of the bankrutpcy petition results in an automatic stay that prohibits creditors from pursuing collection until the bankruptcy is over or the bankruptcy court lifts the automatic stay. The contractor may inform the small claims court of the bankruptcy but if he doesn't, you probably should because continuing the lawsuit may put you in violation of the the automatic stay. The small claims court will either suspend the case pending the outcome of the bankruptcy or simply dismiss it without prejudice. That means you can file it again later if the bankruptcy doesn't result in full payment or a discharge. The bankruptcy will extend the statute of limitations for you to pursue the lawsuit if his Chapter 13 falls apart and he doesn't convert it to a Chapter 7. So for the time being that places you in a waiting game while the court sorts out all the claims and determines whether the debtor qualifies for a Chapter 13 plan and what that plan will look like.

You'll need to ensure that you file your claim with the bankruptcy court timely, no later than 90 days after the date set for the first meeting of creditors. If you don't file timely your claim won't be considered at all and you'll likely end up getting nothing. You will be an unsecured creditor, which puts you in a a pool of creditors that have the lowest priority to get paid. But the details of the bankrupt person's assets matter. Chapter 13 is a bankruptcy in which the debtor files a plan to pay the debts owed over a period of time, up to five years. In some Chapter 13 cases that results in all creditors getting fully paid in an organized manner; if the plan can't pay off all the debts, then at least the plan will give the creditors part of what they are owed without having to race against each other to try to grab assets before some other creditor does. At least that doesn't force you to scramble to get the judgment and start racing around to attach assets to beat the other creditors. You may find the explanation of Bankruptcy Basics on the U.S. Court System website helpful in understanding the process.

Thanks for the explanation. But this person is a fly-by-night operation with his wife and if I am not mistaken, did this bankruptcy game before. He doesn't have any business assets to speak of. He has one house, which by state laws of TX, nobody can put a lien on. His truck is his only other asset and if I am not mistaken, first $40K of his assets are judgement proof. So, his creditors, i.e. people like myself, will get shafted. I just don't want him to get his alleged debt to me discharged under bankruptcy case to haunt him for the rest of his miserable life. This is more of a emotional case for me rather than actually hoping to get some financial compensation.
What do I say to the bankruptcy court to prevent my debt from being discharged? Do I have a case or once chapter 13 BK is approved, or every debt he puts in the case will go away automatically?

 

[adjusterjack]

Did you take the time to read the Bankruptcy Basics?

Chapter 13 - Bankruptcy Basics | United States Courts (uscourts.gov)

 

[Taxing Matters]

What do I say to the bankruptcy court to prevent my debt from being discharged? Do I have a case or once chapter 13 BK is approved, or every debt he puts in the case will go away automatically?

If he was truly a fly by night operation he'd just fold up shop in the middle of the night and disappear to some other part of the country, adopting a new name for himself to set up to fleece his next unsuspecting victims. Or, if he stayed around, he'd be more likely just to go to a Chapter 7 if he doesn't have any attachable assets anyway. That doesn't mean that filing the 13 makes him an upstanding citizen, but it does show some intent to repay at least some of what he owes. There are only a few situations in which you can file with the court to except your debt from discharge. The most common is debts incurred by fraud. But you have to prove the fraud to the court, and simply being a bad business person isn't fraud. You have to show that he intended to commit fraud when the contract was made and planned to never do the promised work. That can be hard to prove. It would also likely mean you need to hire an attorney because to get the finding of fraud where there hasn't already been a court determination of fraud (e.g. a criminal conviction for the fraud or a judgment in your favor in the lawsuit with a specific finding of fraud) the bankruptcy court will have to refer the case to a trial to determine if there was fraud. If you're not a lawyer and don't know the elements of a fraud case, what evidence is needed to prove it, and what you need to do to get that evidence admitted in court then you'd have a rough time of it doing it on your own. There are some other, less common exceptions to discharge, but from the facts you've provided so far, I'm not seeing any that would apply.

I understand the emotional reaction to this. But try to remember that this kind of case is just a dispute over money. I tell my clients in that kind of case, the goal is to get as much money out of it as possible, or lose as little as possible, depending on the side you are on. If the guy is judgment proof now and is likely to be for a number of years, you'll not want to throw a lot of money at trying to get the debt excluded from discharge, then pay to get the judgment, and pay for the effort to try to collect, only to come up empty. l know you'd like the satisfaction of hitting him for something, but my experience with clients has been that the satisfaction doesn't last long, but the money spent to get it they won't get back and they end up regretting putting a lot of money into a fruitless chase.

 

[adjusterjack]

Does txhomeowner2 have to notify the court of his claim?

In case the filer doesn't list the debt.

 

[quincy]

@despritfreya

I have tagged despritfreya, a bankruptcy attorney, to address the bankruptcy questions raised by txhomeowner2.

 

[despritfreya]

I really have nothing to add to this. Taxing Matters' comments are spot on. OP should file a timely Proof of Claim and wait to see what happens. Based upon the comments in this thread, I see no basis for attempting to seek a judgment excepting the debt from Discharge.

Des.

 

[zddoodah]

Does txhomeowner2 have to notify the court of his claim?

In case the filer doesn't list the debt.

Which court? If the debtor has not included the (alleged) debt to the OP in his/her BK schedules, the OP filing a proof of claim with the BK court will serve as "notification" to the BK court. The OP should also notify the small claims court regarding the defendant's bankruptcy. The small claims court should stay the case pending the outcome of the BK.