The Dodgers’ owner, Frank McCourt, has been going through a divorce for the past couple of years. One of the issues in the McCourt divorce is whether the Dodgers team is community property under California state law. If the judge decides that the team is community property, that means it is jointly owned by both Mr. and Mrs. McCourt. Under that scenario, a sale of the team to pay Mrs. McCourt in a marital property settlement would have been possible. However, the team’s bankruptcy filing changes things. Now the team’s creditors are to be paid according to the dictates of the Bankruptcy Code. As a result, Mrs. McCourt could be cut out of proceeds from a sale of the team.

Since this blog is primarily focused on New Jersey, you should know that New Jersey is NOT a community property state. However, even if you live in New Jersey now but were (or are) married and owned property with a spouse in a community property state, you should let your bankruptcy attorney know so that they can properly assess the situation. There are certain disclosure requirements in a bankruptcy where community property is involved, due to the presumption of joint ownership.

For a more in-depth analysis of the financial issues facing the L.A. Dodgers, along with a copy of the team’s main filing in the Delaware bankruptcy court, check out the blog Dodger Divorce.

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At least in New Jersey, the answer to this question is yes and no. Unless you’ve been sued and a judgment has been entered against you, don’t worry, because a creditor cannot just take your money or property. That’s what due process is all about.

But if a creditor has sued you in court and you either failed to answer the lawsuit or you answered but lost the lawsuit somehow, a judgment can (and probably will) be entered against you. Then, a New Jersey creditor could obtain permission from the court to pursue your assets to satisfy the judgment. This creditor can go after money you have sitting in a bank account, which will result in all of your account’s funds being frozen, at least temporarily. They can also obtain a wage garnishment order to take money directly out of your paycheck before you get paid. While there are other remedies a creditor can technically pursue, these are the two that are used most often. For example, it’s unlikely that a credit-card company is going to take and sell your items of personal property – that’s just too much work for too little return.

Be careful if you have moved recently, or if you never updated your address with your creditors. They might legitimately believe that you live somewhere else and try to serve you with a lawsuit at your old address. The problem is that you might not be aware of a judgment against you. While you might have a legitimate argument that you were not properly served with the lawsuit, it’s highly unlikely to be worth your time and money finding and hiring an attorney to challenge the judgment. If the challenge works, you still have to defend against the lawsuit. If your challenge to the judgment does not work, you are still faced with owing money to your judgment creditor, after having paid an attorney to represent you. Many attorneys (myself included) just don’t think it’s worth even taking these types of cases, especially if the judgment debtor would benefit from a bankruptcy instead.

Bankruptcy can wipe out your personal liability on a judgment debt. However, if the creditor’s enforcement of its judgment rights has resulted in a lien being placed on your property, you may wish to consider taking the extra step of having the lien removed, since bankruptcy cannot wipe out the lien. You don’t need to worry about the lien if you do not own any real estate or if you think you won’t purchase any real estate in the future.

If you are calling attorneys for help because you owe money and you are scared that a creditor is going to sue you and you want to know exactly when this might happen and when it does, how long it will take them to get your bank account/wages/whatever, STOP. Unless you are prepared to do something about it right then and there (such as hiring the attorney to help you file for bankruptcy or to defend against the lawsuit you have already been served with), you have no reason to call attorneys, because they can’t help you. I say this because I often get these kind of calls, where the person calling is just exploding with worry, but has completely closed off any possible remedy because, for whatever reason, they won’t file for bankruptcy, at least not right now.

If you actually wish to discuss the pros and cons of personal bankruptcy, I (and many other attorneys) would be happy to take your call. But if you have done your research and you have closed off the possibility of bankruptcy and you already know what all of your non-bankruptcy options are, please save yourself (and me) the time and don’t call.

Photo by taberandrew.

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Of course, I do need to know about actual, ongoing lawsuits, but in this post I’m talking about claims the debtor might have against another individual or against a company.

Why would I want to know about possible lawsuits you might have against others that you never filed in court? Because they are assets. They are assets because, if filed, they might bring in some money to you.

Now, it’s true that court fees, attorney’s fees and expert witness fees might eat up a lot (or maybe even all) of a recovery you might get in a lawsuit, depending on how much in damages you stand to recover. But a danger of not telling the bankruptcy court about your potential lawsuits is that you might no longer have the right to sue after the bankruptcy is over.

This is because a person who is filing for bankruptcy has an obligation under the law to disclose all of his or her assets or potential assets to the bankruptcy court. When you fail to disclose a potential lawsuit to the bankruptcy court but then you later (after the bankruptcy discharge) file that lawsuit, you have taken an inconsistent position – you’ve sworn to a bankruptcy court that you had no assets other than those you disclosed, and those assets didn’t include a potential lawsuit; and yet, you then filed a lawsuit after the bankruptcy based on a pre-bankruptcy claim. The law basically says that you cannot have it both ways.

When you file for bankruptcy, a bankruptcy estate is created. All of your assets, including potential lawsuits, become property of the bankruptcy estate, except for those assets you have managed to exempt. If you do not specifically list and exempt an asset, it is property of the bankruptcy estate. The rule of thumb is that it is always a better idea to list it and exempt it than not to list it at all.

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