Should I Disclose my Class Action Award to my Bankruptcy Lawyer?

A Class Action Award or Suit Membership Should Always Be Disclosed to your Michigan Bankruptcy Attorney

[caption id="attachment_3352" align="aligncenter" width="300"]class action award By Intelligentguy89 (Own work), via Wikimedia Commons[/caption]

Class Action Lawsuits Are Assets in Bankruptcy Matters

If you have received one of those little postcards reading "You May be a Member of Class Action" or if you have already received an award in a class action lawsuit, you need to inform your Michigan bankruptcy attorney, regardless of whether your bankruptcy matter is yet to be filed, is in process, or has already completed. Why? All assets must be disclosed in a bankruptcy petition under Federal law. "Assets" includes claims or lawsuits against third parties, even if there is no sure bet that you will actually win a lawsuit or receive payment on the claim. Every asset disclosed must be assigned a dollar-value in the bankruptcy petition, and it is your bankruptcy attorney's job, then, to protect that asset to the extent possible under law from liquidation in a Chapter 7 case or from causing you to pay more to your creditors in a Chapter 13 bankruptcy case.

Class Action Membership Prior to Filing Your Bankruptcy

While the garden-variety class action lawsuit does not generally pay much to the class members, regardless, if you know you have a claim (even if you haven't followed the instructions on the postcard received to formally enter the class of plaintiffs filing the lawsuit), you MUST let your bankruptcy attorney know. Any lawsuit not disclosed to your attorney will not end up listed among your assets on your Chapter 7 or Chapter 13 bankruptcy petition, and, therefore, will not end up being protected. In a Chapter 7 bankruptcy, this means that the Chapter 7 Trustee has the right to take any money or property you receive in award from you. Additionally, if the lawsuit asset is not disclosed, it will provide a legal defense to the defendant in the suit as the assets listed in your petition, which is a publicly available document, resolve legally the question of what assets you owned on the date that you filed it. If you did not list a claim against that defendant, you must not have had one. Defendant wins.

Class Action Membership or Award after the Bankruptcy Is Closed

What about after the bankruptcy? In particular, after the closure of a Chapter 7 bankruptcy case? After a bankruptcy case is already closed, the question of whether you should tell your bankruptcy lawyer about your award is still always a resounding YES. You need to give your attorney the opportunity to advise you, based on a variety of factual and legal considerations, as to whether the bankruptcy case needs to be reopened and your petition amended to disclose and (hopefully) exempt and protect the claim award. If there is no legal obligation to reopen and disclose the asset, it is a decision you will want your experienced Michigan bankruptcy attorney to help you make and never one that you should make on your own without expert advice.

Class Action Bankruptcy Disclosure: The Bottom Line

The bottom line with regard to class action lawsuits or awards in Michigan Chapter 7 or Chapter 13 bankruptcy matters is that you should always discuss them with your attorney, regardless of when the suit arises or the award is received. It is easy to dismiss those postcards that sometimes show up in your mailbox, but, in bankruptcy, an asset is an asset. If you are a Michigan resident and would like to explore your options for a Chapter 7 or Chapter 13 bankruptcy with an experienced Michigan bankruptcy attorney, please contact us at (866) 674-2317 or click the button below to schedule a free, initial consultation.

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