Bankruptcy & Litigation

Birmingham Bankruptcy Litigation Lawyer

It is important that a litigator knows when a client in a civil suit has or will be filing Chapter 7 or Chapter 13 Bankruptcy. If the bankruptcy schedule does not include potential assets from the civil suit, there is a risk of losing the civil suit to the defense of estoppel followed by a professional malpractice claim.

How do I know if my client has filed bankruptcy?

If your firm commonly represents plaintiffs in civil litigation you can check PACER http://pacer.psc.uscourts.gov to see if any of your clients have filed bankruptcy in the past or are currently in bankruptcy. Running a PACER search on several occasions during litigation may turn up a bankruptcy case filed after you have filed your case.

Why it is important for any lawsuit or potential lawsuit to be listed on the bankruptcy schedules (Judicial Estoppel)

In the past, clients have hired attorneys to handle litigation and at a later date filed for bankruptcy without informing their litigation attorney about the bankruptcy or the bankruptcy attorney about the litigation. This can be a recipe for disaster for all parties involved, because if the client/debtor files bankruptcy without listing the claim in their bankruptcy schedules the client/debtor may loose their interest in the lawsuit. It is vital for any lawsuit or potential lawsuit to be fully disclosed in the bankruptcy schedules.

See: The Doctrine of Judicial Estoppel by Jeffery J. Hartley

The 3 steps a litigation attorney must go through to receive compensation if his client is in bankruptcy:

1. Application for approval of employment of professional person
2. Joint motion to approve compromise/settlement
3. Application for compensation and expenses

Special Note to Plaintiff Attorneys regarding “referring attorneys”:

It is a common and acceptable practice in Alabama for an attorney to be paid a referral fee for referring a case to a law firm. Unfortunately, this sometimes hits a “snag” in bankruptcy court. Most bankruptcy judges will NOT allow a referral fee to be paid, but insist that the referring attorney submit his time in the case in order to be awarded a fee. This can be a tricky and often difficult situation for the referring attorney and the firm to which the case was referred.