Part I: The Setup: Treatment of Prepetition Causes of Action in Bankruptcy Proceedings
By: J. Ellsworth Summers, Jr. and Scott St. Amand
In commercial lending, as in law, no single practice area exists independently of another. Bankruptcy law often intersects with contract law and even personal injury law when debtors find themselves as the plaintiff or defendant in a prepetition civil action. It is important for parties and counsel involved in both the bankruptcy and the prepetition action to understand the interplay between both proceedings, and, when appropriate, to coordinate and cooperate to achieve an equitable result for all interested parties.
As we have discussed in previous posts, there are two fundamental objectives that underpin bankruptcy law: (1) to provide an “honest but unfortunate debtor” with a fresh start, and (2) to equitably compensate creditors.