Bankruptcy

Bankruptcy Estate Includes Future Lawsuit: Judicial Estoppel Dismisses Suit Not Listed In Bankruptcy Schedules.

By Jonathan Alper

When you file bankruptcy you are supposed to list any current lawsuits you have against anyone else, such as a medical malpractice suit, as well as any potential claim against a third party which claim may later result in you filing a lawsuit. Your lawsuits and claims are part of the bankruptcy estate. The trustee can either prosecute the lawsuit in your behalf or he can sell the claim or lawsuit and distribute proceeds to your creditors.

 Frankly, some people do not list potential claims and possible future lawsuits. They figure they can file a lawsuit after the bankruptcy is over and that the trustee will not find out about it. One problem with this debtor strategy is that the person you later sue can dismiss the lawsuit because you did not list the claim in your bankruptcy.

I read a post in the Los Angeles Bankruptcy Law Monitor about a court which applied the theory of judicial estoppel to defend a lawsuit by a plaintiff who had recently filed bankruptcy and did not list the potential lawsuit as an asset. In laymen terms, judicial estoppel means you cannot take inconsistent positions in different judicial proceedings. You cannot tell the bankruptcy court you have no claims and then assert a claim in civil court soon thereafter. In this case, the court dismissed a lawsuit because the plaintiff?s recent bankruptcy asserted that the debtor had no claims or reasons to sue anyone.

Full post as published by Florida Bankruptcy Law on February 22, 2011 (boomark / email).