Employees who file for bankruptcy are supposed to list all their assets in their bankruptcy petitions, including pending lawsuits or potential lawsuit claims. That’s because creditors may be entitled to a share of those assets to satisfy debts.
That’s why it’s always a good idea to check to see whether an employee who is suing you has filed for bankruptcy. If he didn’t disclose the litigation against your company, he may lose the right to sue.
Recent case: Joe was terminated and filed for bankruptcy. Within weeks, he filed a discrimination lawsuit against his former employer.
His attorneys never mentioned the lawsuit in the bankruptcy when asked whether any claims might generate money that Joe could pay to his creditors. The court threw out his discrimination claim because of that failure. (Johnson v. First Technology Federal Credit Union, No. H11-3812, SD TX, 2013)