New York Negligent Misrepresentation Attorneys

Negligent misrepresentation occurs whenever someone makes an untrue or misleading statement in the process of negotiating a legal agreement. The false or misleading statement must be used as a means to entice the innocent party into entering a contract. Consequently, obviously false statements do not typically qualify as negligent misrepresentation. The innocent party must also believe the false or misleading statements and principally rely on those statements when entering a binding agreement.

Untrue or misleading statements can result in an innocent party suffering significant damages as a result of their entering a contract on false pretenses. Victims of negligent misrepresentation generally have the right to pursue civil lawsuits against offending parties. Depending on the type and severity of the situation, criminal charges may also be filed by the relevant government authority.

How Negligent Misrepresentation Intersects with Bankruptcy

There is no getting around it: Bankruptcy is bad for creditors. When someone cannot pay their bills, they may resort to the process to stop collection actions and discharge qualifying debts. In many cases, creditors will only receive a small percentage of what they are actually owed following a bankruptcy proceeding. To make matters worse, some unscrupulous bankruptcy filers may engage in negligent misrepresentation when submitting their bankruptcy petition or during negotiations with creditors.

When someone declares bankruptcy, they file a “bankruptcy petition” with the appropriate court. This petition outlines the filer’s outstanding obligations, financial information, and the debts and liabilities they ultimately wish to reduce or eliminate. Parties filing for bankruptcy are legally required to be truthful and accurate when submitting their bankruptcy petition.

Creditors have the opportunity to negotiate and register objections during the bankruptcy process and do so in good faith based on the information contained in the bankruptcy petition. Creditors can become victims of negligent misrepresentation if the bankruptcy petition is patently inaccurate or misleading. 

A debtor can engage in negligent misrepresentation during bankruptcy when:

• They misrepresent their current income and ability to pay
• They misrepresent their holdings and financial resources
• They misrepresent the value of an asset
• They misrepresent their ownership and possession of one or more assets
• They misrepresent their ownership of a debt

Some debtors will resort to fraudulent transactions as a means of hiding assets and withholding funds from creditors. They may facilitate preferential claims, actual fraudulent transfers, constructive fraudulent transfers, and other tactics prohibited by the Bankruptcy Code. It can be easier for a debtor to claim they do not have possession of a lucrative asset, for example, if they fraudulently transferred ownership of the property to a close friend before declaring bankruptcy.

Negligent misrepresentation in bankruptcy can ultimately lead to creditors receiving less than what they otherwise would have. It can also result in a creditor negotiating a loan modification or some other new agreement based on false or misleading pretenses. Our New York negligent misrepresentation attorneys can assess your circumstances and determine what legal options may be available.