Your attorney negligently steered you into bankruptcy? It could be a good cause of action in legal malpractice. A few technicalities, however. Do you still have standing to sue the attorney? Likely not. In Burbacki v Abrams, Fensterman, Fensterman, Eisman, Formato, Ferrara & Wolf, LLP 2019 NY Slip Op 04128 Decided on May 29, 2019 the Appellate Division, Second Department explains why:
“The commencement of a bankruptcy proceeding creates an “estate” that is comprised of “all legal or equitable interests of the debtor in property as of the commencement of the case” (11 USC § 541[a]; see Osborne v Tulis [In re Osborne], 2013 US Dist LEXIS 190402, *5 [SD NY, No. 13 CV 2803 (VB)]). “Upon the filing of a voluntary bankruptcy petition, all property which a debtor owns, including a cause of action, vests in the bankruptcy estate” (Keegan v Moriarty-Morris, 153 AD3d 683, 684 [internal quotation marks omitted]; see 11 USC § 541[a]; Osborne v Tulis [In re Osborne], 2013 US Dist LEXIS 190402, *5-6). “Although federal law determines when a debtor’s interest in property is property of the bankruptcy estate, property interests are created and defined by state law” (In re Ross, 548 BR 632, 637 [ED NY], affd sub nom. Mendelsohn v Ross, 251 F Supp 3d 518 [ED NY]; see Broadwall Am., Inc. v Bram Will-El LLC, 32 AD3d 748, 750). Causes of action that accrue under state law prior to the filing of a bankruptcy petition, as well as those that accrue as a result of the filing, are property of the estate (see Johnson, Blakely, Pope, Bokor, Ruppel & Burns, P.A. v Alvarez [In re Alvarez], 224 F3d 1273, 1277-1278 [11th Cir]; Winick & Rich, P.C. v Strada Design Assocs. [In re Strada Design Assocs.], 326 BR 229, 235 [SD NY]). “[A] debtor’s failure to list a legal claim as an asset in his or her bankruptcy proceeding causes the claim to remain the property of the bankruptcy estate and precludes the debtor from pursuing the claim on his or her own behalf” (123 Cutting Co. v Topcove Assoc., 2 AD3d 606, 607; see 11 USC § 554; Ladson v Fessel, 85 AD3d 1128, 1129; see also Dynamics Corp. of Am. v Marine Midland Bank-N.Y., 69 NY2d 191, 195-196).
Here, the plaintiff’s legal malpractice cause of action accrued on March 20, 2012, when she, acting on the defendants’ advice, filed the bankruptcy petition (see McCoy v Feinman, 99 NY2d 295, 301; Tantleff v Kestenbaum & Mark, 131 AD3d 955, 956; Landow v Snow Becker Krauss, P.C., 111 AD3d 795, 796). Since the plaintiff had an interest in the legal malpractice cause of action “as of the commencement of the case” (11 USC § 541[a]), we agree with the Supreme Court’s conclusion that the cause of action was property of the bankruptcy estate and that the plaintiff lacked the legal capacity to sue on that cause of action (see Williams v Stein, 6 AD3d 197, 198; Osborne v Tulis [In re Osborne], 2013 US Dist LEXIS 190402, *7-8; see also Johnson, Blakely, Pope, Bokor, Ruppel & Burns, P.A. v Alvarez [In re Alvarez], 224 F3d at 1275-1278).”