In Part One, I explained that if you don’t list your personal injury claim in your bankruptcy, you don’t “own it” any longer and don’t have the right to pursue the personal injury claim. In this post I’ll tell you about another problem you’ll have and about a real case right here in South Carolina.
Judicial Estoppel Can Really Cause You Problems
If you fail to list legal claims during your bankruptcy, you may forever lose the right to pursue those claims. Once the other lawyer finds out your bankruptcy is inaccurate, you can’t say, “Whoops, I guess I’ll call my bankruptcy lawyer and list that claim on my schedules!” It’s too late.
This problem just raised its ugly head in the United States District Court here in South Carolina. Blanche Wright had a legal claim against Richard Guess alleging violation of her civil rights. But when Ms. Wright filed bankruptcy, she didn’t list the federal lawsuit.
Predictably, the defense attorney found out about her bankruptcy filing. And they always do, by the way.
The defense then asked the court to dismiss Ms. Wright’s case because (1) she didn’t have standing to bring it—that is, she didn’t “own” the claim; her bankruptcy estate did, and (2) because Ms. Wright’s claims should be barred because of judicial estoppel.
What Exactly is Judicial Estoppel Anyway?
As Judge Anderson explained, “judicial estoppel is ‘an equitable doctrine that prevents a party who has successfully taken a position in one proceeding from taking the opposite position in a subsequent proceeding.’” This means you can’t say, “I have no legal claims” in your bankruptcy by not listing your personal injury case, then turn around and say, “I do have a legal claim” in your state or federal court case. You can’t “play fast and loose with the courts,” as Judge Anderson explained in Ms. Wright’s case.
Although Ms. Wright actually amended her bankruptcy after the defense filed its motion to dismiss, this didn’t impress Judge Anderson, who stated, “[c]ourts have repeatedly rejected the argument that judicial estoppel should not be applied when the debtor-plaintiff has attempted to remedy an omission by amending her bankruptcy filings.”
What’s All This Mean?
The bottom line is this:
- You must notify your personal injury lawyer if you intend on filing bankruptcy. He needs to know. And he may also be able to refer you to a bankruptcy lawyer he knows will be qualified to handle your case.
- You must list your personal injury claim on your bankruptcy schedules. Don’t ever hide anything from any lawyer you hire, and this is especially true when dealing with assets like claims in your bankruptcy estate.
- If you don’t list your injury claim in your bankruptcy estate, you may lose it forever. Saying “oops, I forgot” will not work.
Your lawyers want the best outcome to your cases. Help them help you by keeping them informed of all your legal problems.
(This is a guest post written by Russell A. DeMott. Click on his biography below for more information about Mr. DeMott’s bankruptcy practice.)
Russell A. DeMott is a bankruptcy lawyer practicing in Charleston, South Carolina. He represents clients in Chapter 7 and Chapter 13 bankruptcy.