I am considering filing bankruptcy in Texas due to problems I had with a remodeling contractor. He damaged the property and I got a judgement against him for $250,000, which he refused to pay and instead declared bankruptcy. His insurance company has also refused to pay and the costs covered by the judgment have increased to $300,000. My debts, all related to are about $425,000 (including my mortgage). I don't have any income right now but am owed about $250,000 and would an attorney to collect and which I can't afford right now. This is my question: if I were to declare bankruptcy, could the bankruptcy court go after my debtors (the insurance company, individuals who owe me money, etc.) and collect from them, possibly collecting enough to pay all of my creditors, which would avoid me having to declare bankruptcy? If I were to sue the insurance company and my debtors it might take years to collect and I don't have the money to sue or to wait that long.
3 Answers from Attorneys
In short, a bankruptcy trustee may go after that debt if it is possible to collect.
When the contractor filed bankruptcy, it probably extinguished his liability to pay you. We can't know that for sure unless we spend some time looking at his bankruptcy case. But it's the most likely scenario.
I would be more interested to hear about the insurance company refusing to pay and all of your interactions with that insurance company. Situations like you've described often call for filing a new lawsuit which results in recovering not only the amount owed (300k in your situation) but also them having to pay you big damages on top of that.
When you file a Chapter 7 bankruptcy, the Chapter 7 Trustee takes over all of your assets, except any exempt assets, and tries to collect them. So, yes, a Chapter 7 Trustee might pursue the insurance company and other people who owe you money, if it makes business sense to do so. The Trustee would then take that money and pay off some or all of what is owed by you, and anything remaining would go to you. That said, this does not help you "avoid having to declare bankruptcy." You can only get this to happen if you declare bankruptcy and once you start down that road in Chapter 7, you cannot get off of it very easily. So, you will have declared bankruptcy, and if successful you will get a discharge of all of your debts that are dischargeable. Even if the Trustee were to recover enough money to pay off everyone that you owe money to, you will still be considered to have filed bankruptcy.
If you do not have the money for a lawyer, or cannot find one willing to pursue the insurance company on a contingency, then the Trustee might be able to do that. But, he/she might not. For example, if the Trustee cannot find an attorney to sue the insurance company on a contingency fee, then the Trustee might just choose to drop the case or settle it for very cheap.
Best of luck to you.
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