How Filing Bankruptcy Can Affect Your Claims Against Your Employer

Written by Galen T. Shimoda and Justin P. Rodriguez

Typically, our clients come to us in a very vulnerable state. They have just gone through, or in the process of going through, a terrible sequence of events that has, or will, lead to their termination. Whether it is due to discriminatory or harassing conduct of the employer, the end result is all the same: Termination, unemployment, and trying to deal with the stressful feelings of having to pay your monthly bills with no income. Even after receiving unemployment, it may not be enough. This is the extreme burden plaintiff's in claims against their employers face.

Like many Americans facing these dire circumstances, a client may turn to bankruptcy to address the situation. While our firm does not practice in bankruptcy, we have many qualified attorneys that we are able to put our clients in contact with to determine whether bankruptcy is right for them. But, that does not stop the interplay between employment law litigation and bankruptcy. It is extremely important that a person going through bankruptcy notify their attorney of this fact even if it is not their bankruptcy counsel. Why? Because an individual's failure to mention in bankruptcy that they have a lawsuit pending or anticipated against their employer or former employer may prevent them from being able to pursue the claim. In other words the failure to disclose may lead to the failure to collect. The legal term of art for this is called judicial estoppel. Essentially, the failure to assert and identify the potential claims that creditors may collect against will be treated as a admission you have no claim. You will thereafter be stopped from asserting the claim against the employer.

Of course, there are exceptions to this general rule. But, it is best to avoid having to fit into an exception altogether. Open communication with your employment litigation counsel will prevent this from becoming an issue in the first place.

The Shimoda Law Corp. legal articles should not be construed as legal advice or a legal opinion on any specific facts or circumstances. The contents of these articles are intended for general information purposes only, and you are urged to consult a lawyer concerning your own situation and any specific legal questions you may have.

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