How was my sister able to file bankruptcy if she fraudulently took money from my account?

You need to hire a bankruptcy attorney to determine whether you have a cause of action against her under 11 U.S.C. 523(a)(4 & 6) which could make the debt due to you non-dischargeable in her bankruptcy case.

Because your sister had a judgment against her stating that she owed you money from the estate does not mean that she can't file Chapter 7 bankruptcy and have the debt, along with other debts, discharged. It is not clear in your inquiry whether she was convicted of criminal fraud or merely liable for the debt of misuse of estate funds. If it was not criminal fraud, she may have the debt discharged, similar to the discharge of credit card debts, medical debts, and other debts. You may want to contact the lawyer who handled the case or review paperwork to determine your rights, but it appears that she may have the debt discharged and not be subject to your garnishment action.

The facts that you state do not prevent her from filing a bankruptcy petition. However, the issue becomes - can she discharge her obligation to you in her bankruptcy? (If you obtain a judgment of non-dischargeability, you claim will still exist after she receives a discharge of her other debts.) You have the obligation to file a lawsuit (in bankruptcy it is called an Adversary Proceeding) against her to press your claim that what she owes you is non-dischargeable in her bankruptcy. There is a very limited time period in which you can file the AP, so your attorney needs to act quickly to file it. If you do not file the AP within the allowed time-frame, you could lose your right to press the claim of non-dischargeability and be limited to filing a regular claim in her bankruptcy. This answer was provided as a public service to a question posed on the Law Q & A website. The answer is based on the information provided and is limited to those facts. Additional information could change the context of the question and materially change the answer.

You need to talk to a good bankruptcy attorney experienced in creditor rights.

She is free to file bankruptcy. The obligation she owes to you may or may not be dischargeable in her bankruptcy case. You should find the papers from your lawsuit against her and take them to a bankruptcy attorney to determine whether you have a claim to make for non-dischargeability. If you take no action in her bankruptcy proceeding then you will very likely lose all rights to collect from her at any time in the future. Do not delay - there are deadlines that are critical if you wish to object to discharge.

You will need to see a bankruptcy litigation attorney to determine if you have sufficient evidence to prove that this debt is not eligible to be discharged in bankruptcy. It is crucial that you act right away to do this because the deadlines in bankruptcy court are very short.