Q: I am currently in a lawsuit against a former business partner who breached our partnership agreement and who owes me a great deal of money. I just received a notice that he has filed for bankruptcy. I am absolutely stunned. What impact, if any, will that filing have on my lawsuit? What are my options at this point?
A: First and foremost, the filing of the bankruptcy petition should operate as an automatic stay on your lawsuit. What this means, in a nutshell, is that your lawsuit will come to a, for lack of a better term, rather speedy halt. Absent an order from the bankruptcy court relieving you from that automatic stay, you will not be able to go forward with your pending lawsuit. You will, instead, need to proceed in the context of the bankruptcy case with respect to a monetary claim against your former business partner. Assuming this person has some assets, at some point you should be notified, by the bankruptcy court, of a deadline to file a document known as a proof of claim, which is a statement of the amount of and basis of your claim against the former business partner. You would attach, to the proof of claim, any documents supporting your claim. If it is a "no assets" case, however, you may not even have that opportunity. Unfortunately, even with a case where there are some assets, at best, in all likelihood, you will only be paid a small portion of your claim.