In a fairly unique case out of a California bankruptcy court, a judge allowed a medical malpractice plaintiff to pursue a claim against a defendant surgeon who had recently entered into bankruptcy protection.
In the case, Weakly-Hoyt v. Foster, the defendant appealed from a lower court ruling allowing a plaintiff to proceed with a medical malpractice claim against him although he had filed for bankruptcy. The facts are as follows:
The plaintiff sent over a complaint alleging medical malpractice to the defendant surgeon. Rather than reply to the complaint, the surgeon merely sent the plaintiff a letter explaining that he was in bankruptcy protection. However, a few months later, the plaintiff obtained a court order granting her relief from the automatic stay of the bankruptcy proceedings.
This stay enabled the plaintiff to effectively sue the defendant, even though he was in bankruptcy protection. Specifically, the court held that “[t]here is no bankruptcy impediment to the continued prosecution of [the medical malpractice case], so long as recovery against debtor is limited to available insurance proceeds.” The reason, the court held, was that even if the suit was successful it would not have any bearing on the defendant surgeon’s finances. It would all be paid by his insurance company.
This, the court reasoned, made all the difference, since the automatic stay function of the bankruptcy proceeding is designed to protect the person or organization entering into bankruptcy, rather than any third party who has guaranteed the debts of the filer.
What is an Automatic Stay?
The “automatic stay” that is referred to in the case above is what happens when a person enters into bankruptcy protection. Essentially, all debts are “stayed,” meaning that debt holders cannot contact the debtor trying to get him or her to pay. In fact, if a debt collector does attempt to get around the automatic stay of a bankruptcy proceeding, it may be in violation of the law and be held liable to the debtor for damages.
The reason why the automatic stay didn’t act to prevent the suit in this case was that the money being paid out was not going to be paid out by the person who was filing for bankruptcy. Instead, it was to be paid out by the insurance company. This, the court held, is a totally different situation and not one that the bankruptcy laws of the United States cover.
Are You Thinking of Filing for Bankruptcy?
If you are considering filing for personal bankruptcy, you should contact an experienced Kentucky bankruptcy law attorney before doing so. The process of filing for bankruptcy can be extremely complex, and mistakes are too easy to make. When mistakes are made, the bankruptcy process can be held up for months at a time. Moreover, there are many nuances that a savvy bankruptcy law attorney can familiarize you with, making sure that you get the most out of your filing and that you stand the best chance of getting back on your feet as quickly as possible. Call 866-366-3328 to set up a free initial consultation today.
More Blog Posts:
Bouncing Back After Bankruptcy in Kentucky, Kentucky Bankruptcy Lawyers Blog, published July 16, 2014.
Bouncing Back After Bankruptcy: Rebuilding Your Credit Score, Kentucky Bankruptcy Lawyers Blog, published August 24, 2014.