Though a client being awarded millions of dollars in damages by a jury may be cause for celebration, those millions may disappear because of a potentially avoidable bankruptcy discharge. In the U.S. Law Week article “Congratulations on Your Victory at Trial: But Is Your Multimillion Dollar Judgment Protected from Bankruptcy?” Senior Counsel David Richardson discusses the options that may be available to protect a judgment from a possible bankruptcy discharge, and the steps that should be taken during the trial to maximize those options.
Mr. Richardson recommends ensuring that the elements of nondischargeability are clearly addressed at the initial trial, not just as a matter of verbiage in findings of fact, but also as an issue proven at trial. He also recommends that litigators familiarize themselves with Section 523(a) of the Bankruptcy Code, which provides a list of 19 categories of debts that are exempt from a bankruptcy discharge.
Losing an entire judgment in the defendant’s bankruptcy case is a very real possibility. However, planning ahead during trial can help litigators protect that judgment in certain situations, and can mean substantial differences in both collection costs and the ultimate recovery.