Can I file bankruptcy in Sarnia if I have been sued for damages?

by Joel Sandwith on July 14, 2011

I received an email the other day from a client who wondered if he could file bankruptcy.  He is being sued for damages related to some work he did on a contract for someone, and if he loses he won’t be able to pay.

This can really be a complicated issue.  The first thing to note is that at this point, the client doesn’t really have a debt (let’s assume this would be the only debt, and otherwise he won’t need to file bankruptcy).  So, part of the issue he faces right now is that until there is an amount owing, there’s no point in filing bankruptcy.

The second point is that in Canada, bankruptcy Trustees are not lawyers – this means the Trustee you choose to work with cannot give you legal advice and won’t be able to assist you in determining if you will win or lose a case.

Let’s assume that this client loses the lawsuit.  Can he file bankruptcy now?  Yes, he can, but he needs to be aware of a few things.  First, the person who sued him is now a creditor, and has some rights in bankruptcy.  He (the creditor) could request ‘leave’ or permission from the Court to continue his action.  This may be rare, but is technically possible.  Second, the creditor may be able to file an opposition to the bankrupt’s discharge – this is basically a mechanism where the creditor can try and recover some of the money, even while the person is bankrupt.

The bottom line is that bankruptcy in this type of situation may be a good solution, but it certainly requires a lot of information and a consultation with a qualified and licenced bankruptcy Trustee.  If you are struggling with any types of debt, we’d invite you to call us at Hoyes, Michalos, at 1-866-747-0660 or locally here in our Sarnia office at 519-344-1058.

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

Leave a Comment

Previous post:

Next post: