Bankruptcy

Appeals Court: Failure to Amend Chapter 13 Papers Prevents Lawsuit From Going Forward

By Craig Andresen, Minnesota Bankruptcy Attorney

If a chapter 13 debtor suffers employment discrimination years after filing her bankruptcy, and then fails to amend her bankruptcy papers to say she can sue her employer, “judicial estoppel” prevents her from ever suing her employer over the discrimination.  In this recent decision by the U.S. Court of Appeals, Eleventh Circuit, one judge on the court was troubled by the result, and he wrote a separate opinion explaining why.

This decision, Robinson v. Tyson Foods, 2010 WL 396130 (11th Cir. Feb. 5, 2010), means that in the Eleventh Circuit, and possibly anywhere else in the United States, a chapter 13 debtor has to amend the bankruptcy papers as soon as he or she acquires a right to sue someone.  Otherwise, the courts will say that the debtor has concealed the lawsuit from the judicial system, and thus the lawsuit cannot be pursued.

In this case, the debtor filed a chapter 13 in 2002.  In 2005, she resigned from Tyson Foods, claiming racial discrimination forced her to do so.  She sued Tyson Foods in 2006.  In 2007, she paid off her chapter 13 plan and received a discharge.  Because she never amended her bankruptcy papers to include the lawsuit as an asset she owned, her case against Tyson Foods was later dismissed.

The appeals court ruled that whenever a chapter 13 debtor experiences a change of circumstances or acquires an asset, the bankruptcy papers have to be amended, as long as the bankruptcy case is still pending.  Although one of the appeals court judges was concerned by the possibly unintentional nature of the omission, he nevertheless concurred in the result.

Full post as published by Bankruptcy Law Network on February 17, 2010 (boomark / email).