Legal Malpractice

Failure to List Legal Malpractice Lawsuit as an Asset In a Bankruptcy Leads to Dismissal of Lawsuit

By Cassandra Crotty

In a recent article in the Chicago Daily Law Bulletin a decision by the Illinois Appellate Court was discussed dealing with the failure to schedule legal malpractice claims in a bankruptcy proceeding (Unfortunately, the case itself is unpublished, Dawn and Donald Patrzykont v. Randall A. Wolff, No. 1-07-0238).  According to the article, a couple of weeks ago the Illinois Appellate Court dismissed a couple's legal-malpractice lawsuit based on a lack of standing because of their failure to list the cause of action as an asset during their bankruptcy proceeding.  The Court wrote that when a debtor files a bankruptcy petition, he must file a schedule of assets and liabilities, including any cause of action that accrued prior to the bankruptcy filing.  A trustee is then assigned to handle the debtor's property , with the trustee having the exclusive right to pursue the causes of action listed in the bankruptcy schedule.  The Court further explains that a trustee can abandon a scheduled asset, but if an asset is not properly scheduled (like in the present case) it is not abandoned when the bankruptcy case is closed.  Consequently, if a legal malpractice action is unscheduled in the client's bankruptcy the claim remains the asset of the bankruptcy estate (not the client) even after the bankruptcy case is closed.

Full post as published by Illinois Legal Malpractice Blog on January 28, 2008 (boomark / email).