What to do if I have a family member who is a financial planner and is being sued by a party who lost money from an investment that didn’t perform well?

My family member thought that the company he used to broker the deal had the proper E & O insurance but turns out they didn’t and have since gone bankrupt. Therefore this party is suing my family member directly and they don’t have the money to fight them, nor do they have the money to pay what they are asking. What can be done in these instances where a lawyer has convinced a party to go after a person or persons, not a corporation, for lost investment money when there is no money available? Is there any option for my family member but sell their house in order to pay lawyer fees or settle?

Asked on September 22, 2012 under Business Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

Another option is to declare bankruptcy if the family member loses the case--he or she could, for example, defend the case him- or herself (acting as his or her own attorney; pro se), on the grounds that a bad investment is NOT grounds to sue a financial planner unless the planner violated fiduciary duty or misrepresented the investment. Then, if the family member loses and there is a judgment against him or her, he or she could file for bankruptcy.


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