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Suing debtor who files bankruptcy

I loaned $6,000 to a deadbeat relative by marriage and he just filed bankruptcy. I guess the money is gone because he doesn't seem to have a job or any means to repay the loan. He says he'll repay it, but I doubt it. I did get a note backed by his camper which I think may have some equity in it. Can I sue him to collect the money now or do I have to wait until after the bankruptcy?

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No, you should not sue him now.  Once the automatic stay is in place after the bankruptcy petition is filed, it will remain in place with respect to the debt in question until the property that secures the debt, in this case the camper, is no longer part of the bankruptcy estate, the case is dismissed or closed, or until you obtain relief from the stay.

Depending on the circumstances (such as whether your relative has filed Chapter 13 or Chapter 7), and given the amount involved, you might consider contacting MA bankruptcy attorney to discuss what options, if any, you have.  You should not take any legal action on your own, or attempt to collect the money in any way, however.  Any legal action taken on your part could land you in hot water. It's possible you could face sanctions for violating the automatic stay.  In some case, bankruptcy courts have held those who willfully violate a stay liable to the debtor for damages, costs, attorney’s fees, and even punitive damages.  (See 11 U.S.C. §362(k)).

After looking over your situation, your attorney may advise you to wait until the bankruptcy is concluded and then simply ask your relative to pay back the money.  He may not be obligated by law to repay you at that point, but he may feel a moral obligation to repay a family member.  Good luck.



Submitted Thu, 12/19/2013 - 11:07

You can still sue, but any legal action you can take must begin in the Bankruptcy Court. An attorney could help you evaluate whether this would be throwing good money after bad. Particularly, you may have more options depending on whether your Note is a valid secured interest. There may be other claims you can assert depending on the circumstances surrounding the loan.

There are brisk deadlines for some types of claims. If they are not asserted timely, you can lose your rights.

I would begin analysis with the 341 Notice and the Note/loan agreement, plus the exact story, of course.


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