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Bankruptcy Law/Lawsuit during bankruptcy


My husband operates a small business and filed chapter 13 four years ago in Alabama when the economy went South.  He had a line of credit loan for about $20,000 at a local bank. (Before the bankruptcy filing, he asked the bank for a loan, with collateral, to cover the line of credit and pay off some credit cards. In spite of a long history with the bank and excellent credit, they denied the loan.) They have been receiving distributions from the bankruptcy court - 28% of the total payment - but have just been granted a judgment also.  My husband's business has also made irregular payments to the bank in response to their threat of suing. Question:  Can the bank legally sue while receiving distributions? (He has also been diagnosed with Alzheimer's which they are aware of. I have POA because he is not really able to conduct business now.) (He did have an attorney/friend handling this but he died suddenly, so he has no legal representation.)

Brenda -- you need to get legal advice pronto;  you can find a good consumer bankruptcy lawyer on the website (bankruptcy debtor attorney trade assn);  here's what's out of whack:

1) when your husband filed, the automatic stay kicked in and stopped all lawsuits and attempts to collect debts;  2) when his 13 plan was confirmed, the stay was no longer in effect BUT the confirmed plan bound all creditors including the bank;  3) as a result they had no business getting paid over and above what the ch 13 trustee paid them and 4) if they were just granted a judgment in state court as I read your message, and your 13 is still active, that judgment is void.  No they cannot legally sue after a 13 is filed and after the plan has been confirmed.

A good bankruptcy attorney can fix all this and that bank is in major league trouble it seems like to me.

With his POA you can handle, with the attorney, whatever is necessary to fix.  Let me know how it turns out!


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Consumer bankruptcy questions invited. I've been filing Chapter 7, 11 and 13 cases since 1985 in Calif and Arizona. I do NOT do homework questions. Let me know what state you're located in when you write. My bankruptcy practice is limited to California and Arizona but inquiries from other states are welcome. Your local jurisdiction determines exemptions. Find more background information at our website, Individual Chapter 11 and small business chapter 11 questions invited. We can also advise on the creditor's side if for example you have a fraud case, money judgment etc against someone who has filed (or is threatening) bankruptcy. We have filed and defended numerous adversary complaints in bankruptcy court and opposed trustees' demands for turnover of assets from time to time.


My partners and I have filed over 5000 consumer and small business cases to date in California and Arizona.

I've been a member of the California bar since 1984 and Arizona since 2004; also a member of the National Association of Consumer Bankruptcy Attorneys, Bankruptcy section of the Arizona State Bar, Tucson Association of Consumer Bankruptcy Attorneys, Arizona Consumer Bankruptcy Counsel and American Hellenic Educational and Progressive Association (AHEPA).

I've written a booklet on land trusts for real estate owners, players and dealers, and co-authored a special edition of "Stop Sitting on Your Assets". I was a writer of a monthly law review article relating to California real estate issues and pending and recently enacted legislation.

Attorney at law, experienced in trial procedures, adversary complaints filed and defended and numerous claims objection proceedings as well as filing cases for consumer and small business debtors.

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