Does Bankruptcy Shield Companies From Liability in Massachusetts?

When companies file for bankruptcy, the general assumption is that they have run out of money. However, many business owners and corporate executives choose bankruptcy for more subtle, tactical reasons. Some choose this option as a vehicle for restructuring the way they do business.

In order to realize the full implications and possibilities of bankruptcy, it is important to know what actually happens once this legal process is complete. One of the most notable effects of bankruptcy is potential immunity from lawsuits.

If your business is facing lawsuits, bankruptcy could allow you to avoid litigation. However, it is best to speak with an attorney before you make any hasty moves. Our legal professionals can assess your unique situation and recommend the best course of action based on your specific circumstances. If bankruptcy is the best way forward, we can then guide you through the entire process and ensure that you are handling this in the best possible way.

Can Bankruptcy Stop Lawsuits?
When you file for bankruptcy, something called an “automatic stay” will be issued. This court order prevents any collection activity, including settlements or judgments resulting from a lawsuit. However, this usually only applies to civil or commercial litigation, and you will still need to pay settlements or judgments for things like criminal cases and matters related to divorce. In addition, it is important to remember that plaintiffs can request that the bankruptcy judge lift the automatic stay so that they can proceed with their lawsuits. In some cases, judges grant these requests.

Purdue’s Bankruptcy Shows How Effective This Tactic Can Be
In September of 2021, one of the biggest legal stories was the bankruptcy of Purdue Pharma, the company that had been accused of creating the opioid epidemic by aggressively pushing synthetic opioids like OxyContin. The company was facing a number of lawsuits, and they chose to file for bankruptcy. With the approval of a federal judge, this decision immediately settled over 3,000 active lawsuits against the company, and it also provided them with broad immunity from future lawsuits. The overall plan involved payments of more than $4 billion in cash and assets, plus the decision to restructure Purdue Pharma into a new nonprofit organization.

The federal judge argued that it was not likely that Purdue’s victims would receive more money if they took the company to trial. The general idea is to provide families with settlements from Purdue instead of forcing them to go to court. But families that have been affected by the opioid epidemic argue that this broad immunity means that the company will never issue any kind of apology, and they will never achieve a sense of justice.

Enlist the Help of a Qualified Attorney Today
If you have been searching the Massachusetts area for a qualified, experienced bankruptcy lawyer, look no further than the Law Offices of Johnson, Sclafani & Moriarty. We have considerable experience with matters related to bankruptcy, and we understand the full range of implications that are associated with this important decision. Whether you want to restructure your business or avoid lawsuits, bankruptcy may be the best choice. Book your consultation today, and we can go over your legal options together. 413-732-8356