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Be wary of losing a judgment in bankruptcy

If you are pursuing legal action against an entity, the last thing you want to worry about is the company going under or becoming insolvent due to a hefty judgment against it. This scenario brings about thoughts of Great Benefit Insurance filing for bankruptcy after Matt Damon’s character won a judgment against it in “The Rainmaker.”

While that was a movie, it is arguably an example of art imitating life. It is not unheard of for a company to lose a legitimate judgment to a bankruptcy filing. After all, the U.S. Bankruptcy Code allows for companies to seek protection from judgments owed against them. When this happens, the judgment is worth less than the paper it is printed on. However, there are ways to protect against this scenario. 

Essentially, civil judgments obtained through a lawsuit claiming fraud or intentional misrepresentation cannot be discharged under the U.S. Bankruptcy Code. This means that if damages are awarded based on findings that a company acted with the intent to defraud another in a lawsuit, the company may not have this type of award discharged in bankruptcy.

With that said, if you are seeking damages based on a breach of contract claim, a patent infringement claim or a breach of warranty claim, it may be worth considering whether a fraud or intentional misrepresentation claim may be brought as well. The combination of these claims may give you the legal standing you need to preserve a judgment.

The preceding is not legal advice, and every situation is different. Contact an experienced business litigation attorney for advice and information about your specific case. 

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