Best Ohio Employment Attorney Answers: How does a bankruptcy filing affect my race discrimination lawsuit? How does a bankruptcy stay work? How long does the stay delay my sexual harassment claims? What can you do to get out of the bankruptcy stay and move forward with my FMLA case?
You were just fired from your job for no reason. You consult with an attorney and he or she determines that there is evidence showing that you were wrongfully terminated in violation of the law and a lawsuit follows. Only one problem, you worked for a very small company or your company is not doing well financially. Now you are suing the company, asking for money damages. During the lawsuit, the employer’s financial status continues to deteriorate. The employer decides, mid-suit, to file for bankruptcy. What happens to your lawsuit?
Boom. Automatic stay of any further proceedings pending the resolution of the bankruptcy. Title 11 of the United States Code is often referred to as the Bankruptcy Code. One area of the Code that usually shows up in non-bankruptcy lawsuits is the automatic stay provisions.
Embodied in the Bankruptcy Code at 11 U.S.C. Section 362, the automatic stay is essentially an injunction against claimants and creditors of a bankrupt debtor which prohibits most actions against the debtor or property of the estate of the debtor. As the name implies it is “automatic.” No motion or other action is required by your employer to make the stay of your wrongful termination case go into effect. Upon the filing of a bankruptcy petition with the clerk of the bankruptcy court, and a notice with the court of common pleas or federal district court, the stay automatically takes hold of your lawsuit.
It is because of the possibility of an employer’s insolvency, among other reasons, that our employment law attorneys regularly name the individual boss, manager or supervisor that is responsible for the discriminatory or otherwise unlawful employment practice. This is particularly true where the company boss is the perpetrator and attempting to shield himself or herself from liability by closing a corporate shell. The boss is living in a mansion and driving a new expensive sports while claiming the company is broke. But, many employment laws allow the wronged employee to sue the boss directly for his or her own wrongful or discriminatory conduct. (For more on this see: Can I Sue My Boss Personally For Discrimination In The Workplace? Best Attorney Reply).
But, I digress. The automatic stay triggered by an employer’s filing of bankruptcy applies to an employment lawsuit filed by a current or former employee. If you have a pending lawsuit, once a notice of bankruptcy is filed with the court, your case literally shuts down until further action can be taken to lift the stay. Of course, this does not prevent your legal counsel from discussing the case with the other side, having settlement discussions and potentially resolving the case while the bankruptcy is pending; however, your case will not be able to move through the judicial process and all previously established dates, such as your trial date, would be stayed pending resolution of the bankruptcy.
So, say a month or two passes and the bankruptcy is officially discharged, what can I do? Well, first, your attorney and you will make the practical assessment of determining what is left, if anything to pursue against the employer. If the bankruptcy wiped the company of all its assets, your lawsuit may be worth nothing more than a piece of paper saying you’re the winner. If there is still reason to pursue the matter, your attorney will look to lift the bankruptcy stay.
An automatic stay remains in effect until the court lifts the stay at the request of a creditor; the debtor gets a discharge; the bankruptcy case is closed; or the item of property is no longer property of the estate. In the typical Chapter 7 case, the Automatic Stay will terminate approximately 90 to 100 days after the filing of the bankruptcy case. In a Chapter 13 case the stay remains effective for the life of the Chapter 13 plan. So, in a typical employment case, your attorney or you will want to monitor the bankruptcy case to see when it is discharged. Upon that time, your attorney can file with the court a motion to reinstate or reactivate the case now that the bankruptcy has been discharged and no longer requires the stay. At that point, your case can proceed to hopefully obtain what’s left of the pie following the bankruptcy.
As the above shohuld make clear, there are a lot of potential twists, turns, and bumps in the road to deal with during an employment law claim that necessitate having experienced employment law lawyers at the wheel of your case.
If you are searching “I need a lawyer because I have been wrongfully fired or terminated;” or “I have been discriminated against based on my …” race, national origin, gender, age, religion or disability; or even think that you might need an employment lawyer, then it would be best to call the right attorney to schedule a free and confidential consultation at 866-797-6040. Spitz, The Employee’s Law Firm and its attorneys are experienced and dedicated to protecting employees’ rights and solving employment disputes.
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