Charlotte Bankruptcy Lawyer Bryan W. Stone of Arnold & Smith, PLLC answers the question “Will anyone find out about my bankruptcy?”
The Illinois Supreme Court is set to rule on a case involving a debtor’s failure to disclose an unliquidated personal injury claim in his bankruptcy proceeding. The facts of the case serve as a warning to all debtors and potential debtors that all assets—even non-cash assets that a debtor is uncertain to recover—must be disclosed in a personal bankruptcy.
The debtors in the bankruptcy case—a husband and wife—filed for bankruptcy in 2008. In 2009, they modified their bankruptcy plan after the husband was injured in a work-related accident and began receiving workers’ compensation payments. After the husband returned to work the following year, he was injured again in a work-related accident. On the way to the hospital, he sustained further injury when the ambulance that was transporting him was involved in an accident.
Since the injuries the husband sustained in the ambulance accident were not work related, the husband sued the party responsible for causing the ambulance accident in state court. After bringing that lawsuit, the husband and wife were granted a discharge in their bankruptcy action.
When the defendant in the ambulance accident case learned about the bankruptcy, he moved for summary judgment, arguing that the husband was required to disclose the ambulance-accident claim in his bankruptcy proceeding. In general, debtors must disclose all of their assets in a bankruptcy—even non-cash assets.
Understanding that one’s house or car is an asset is one thing, but is it reasonable to expect—and to demand as a matter of law—that a debtor know that the potential of a recovery made against a negligent party is an asset?
The trial court in the ambulance-accident claim answered in the affirmative, and an Illinois appellate court agreed. Those courts held, in essence, that the husband had to disclose the ambulance-accident claim in his bankruptcy, and his failure to do so barred him from suing the negligent party.
The doctrine that the trial and appellate courts cited in the case is called “judicial estoppel.” That doctrine prevents plaintiffs from litigating factually inconsistent claims in different lawsuits. The elements and factual applications can be complicated, but at its essence, “judicial estoppel” limits plaintiffs in legal actions to the proverbial “one bite at the apple” in a court of law.
After summary judgment was granted and affirmed, the husband appealed to the Illinois Supreme Court. That court is expected to rule on the husband’s claim later this year.
The lesson for any debtor is that assets must be disclosed in a bankruptcy proceeding, even “unliquidated personal-injury claims.” Unliquidated simply means that the claim has not been reduced to cash. If it could be, however, it needs to be disclosed. If an asset is not disclosed, a debtor may face dismissal of a bankruptcy proceeding, sanctions, or dismissal of personal-injury actions in other courts of law.
If you find yourself needing the services of an experienced Charlotte, North Carolina bankruptcy attorney, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with the best advice for your particular situation.
About the Author
Bryan Stone is a Partner with Arnold & Smith, PLLC, where he focuses his practice on all aspects of bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.
A native of Macon, Georgia, Mr. Stone attended the University of Georgia, where he earned a BBA in Banking and Finance, and Wake Forest University School of Law, where he obtained his law degree.
Following law school, Mr. Stone relocated to Charlotte, where he currently serves as Chair of “Bravo!” – a young professionals organization associated with Opera Carolina – and founded the University of Georgia Alumni Association of Charlotte.
In his spare time, Mr. Stone enjoys perfecting his barbeque skills for the annual “Q-City BBQ Championship” and playing softball in the Mecklenburg County Bar softball league.
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