Funny thing about bankruptcy. While many people will decry the use or prevalence of bankruptcy, especially those who work for or are sympathetic to creditors’ interests, you may be surprised by those who are willing to avail themselves of the protection a bankruptcy filing offers.
A man running for the Wisconsin state assembly as a conservative admits he filed bankruptcy in 2011. He claims a “frivolous lawsuit” by his former business partner caused the business to fail and necessitated his bankruptcy.
From the timeline, it is unclear if the lawsuit caused his home to go into foreclosure, or if it was a result of the mismanagement alleged by his business partner at the time. Nonetheless, he and his wife eventually filed Chapter 7 bankruptcies to discharge their debts.
As the story notes, the bankruptcy filing would typically place on hold other lawsuits, due to the operation of the automatic stay. The automatic stay can prevent a single creditor from obtaining a large judgment and claiming all or most of the potential assets of an individual or company.
In this case, there may not have been any assets to begin with, as the Chapter 7 indicated he had more than $600,000 in debts and only $25,000 in assets. He claims the financial crisis of 2008 and the economic downturn caused his problems. However, the lawsuit filed by his partner did not appear to be frivolous, as it was not dismissed by the court, but by the partner after the bankruptcy case resolved his issues.
Whether for personal or business, bankruptcy is a tool that we hope never to need to use, but can be very thankful for its existence in times of need.
Source: jsonline.com, “Assembly candidate defends bankruptcy, home foreclosure,” Daniel Bice, Milwaukee Journal Sentinel, August 29, 2015