Bankrutpcy Ends the Case

The interplay of bankruptcy and personal injury or legal malpractice cases is complicated. Basically, once one files a Chapter 7 petition, all assets, including the penny in petitioner's pocket becomes part of the Bankruptcy estate. That estate includes any personal injury claims, and even any future legal malpractice claims. If they are listed in the schedules, then the trustee has the right to litigate and collect for the creditors. If they are not, then, for the most part, they will be lost to the plaintiff. Here, in Santonocito v Moskowitz, Passman & Edelman; 2012 NY Slip Op 30580(U)
Supreme Court, New York County ;Docket Number: 114418-2010; Judge: Judith J. Gische we see a plaintiff who has a good legal malpractice case lose it all.

"On June 1,2004, prior to filing the personal injury action, plaintiff and his wife flied a voluntary petition for bankruptcy under Chapter 7 of the bankruptcy ("bankruptcy petition"). The Santonocitos brought the petition pro-se, but a legal services company (We the People) prepared and filed the petition on their behalf, charging them a $229 fee.


Schedule B of the bankruptcy petition requires that the debtor "list all personal property of the debtor of whatever kind." Item 20 requires that the debtor lid "Other contingent and unliquidated claims of every nature, including tax refunds, counterclaims of the debtor, and rights to setoff claims. Give estimated values." Item 17 of Schedule B requires the debtor to also list "Other liquidated debts owing to debtor, including tax refunds." The Santoncitos response was that they had "Proceeds from Auto Accident"

"When a debtor files for bankruptcy protection, this creates an "estate' comprised of 'ail legal and equitable interests of the debtor as of the commencement of the case (1 1 USC 541 [a][1]. A pre-petition injury qualifies as a legal interest, within the meaning of the statute (In re Corbi, 149 B.R. 325,329 [Bankr.E.D.N.Y.l993]) and a debtor is required to disclose in its bankruptcy petition any causes of action that would be brought by the debtor (Kunica v. St. Jean Financial Inc., 233 8.R. 46 [SDNY l999Q]). This is for the benefit of the creditors (Kunica v. St. Jean, supra). If the debtor fails to list a claim, "an unscheduled claim remains the property of the bankruptcy estate... Crawford v. Franklin Credit Management Corp., ., -B .R.--, 201 1 WL 1118584 [S.D.N.Y. 2011; also Bromley v. Fleet, 240 AD2d 611 (2d Dept 1997), Consequently, the debtor lacks standing to bring a lawsuit in connection with such claims after emerging from bankruptcy, and if s/he does, the lawsuit must be dismissed."
 

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