Trustee reopening after 7 years due to class action settlement

[dj007]

So a relative filed chapter seven in 2014 and discharged the same year. around 2018 it was found that he was entitled to join a class action malpractice for medical procedure that was done years prior 2014. So relative joined the class action around 2018, now the trustee reopened the case to include the settlement in the bankruptcy estate. Does my relative have any standing to challenge.
any advise or where to start searching will be appreciated.
Thanks

[justbroke]

I don't think so, but that's just my personal opinion.

If a debtor becomes entitled to the settlement before the Chapter 7 was filed, then any recovery could be property of the bankruptcy estate. The debtor could claim some exemptions in the settlement, but I think settlements may not be easily protected. Usually personal injury settlements are written specifically with how the money is allocated (e.g. medical bills, pain and suffering, and other). Which portions of a PI settlement are exempt could be based on State non-bankruptcy law.

I've seen at least one case where it was re-opened more than 10 years after the discharge.

The place to look is back to the relative's attorney that represented them in the original bankruptcy. It is likely that the 2014 Trustee is trying to insert themselves as the party, which would normally be correct. The debtor may need to assert themselves into the process and at least make claims for any exemptions. This debtor really needs an attorney or to go back to the original attorney.

If the debtor doesn't care, then they should still seek out their old attorney.

If the debtor filed Pro Se, then there is going to be some learning curve. They may want to see if they can get a pro bono attorney or one that may work on potential contingency (based on the class action).

[flashoflight]

It may be possible to pay the debtor's new legal fees in 2021 from the settlement on top of the exempted amount in order to carve out the exemption for PI. I agree with JB that the rest of it is non-exempt and will be lost to the creditors in the 2014 CH7. Your relative should hire BK debtors counsel willing to be paid through the settlement proceeds.

[dj007]

Thanks guys, he filed pro- se while living in NY and soon after around 2015, moved to Florida. The court papers about the case been reopened were sent to the old address back in NY but he found out because the trustee sent him an email that the case was being reopened a couple of days ago.
In my research it seems that as you guys pointed, if prior or during 2014 the class action existed then the settlement is estate property. But it seems that the FDA approved or discontinued the medical procedure around 2015 and soon after 2015-16 the class action was commenced. So if that is the case it would appear as he has a chance of the settlement not being touched.

Any recommendations on counsel in Florida? or should he get counsel in NY?...Will it be contacting the court directly the best course of action?.
Thanks

[justbroke]

No recommendations. Remember that whether the property (the settlement) is part of the bankruptcy estate, is when the event which gave cause to the lawsuit arose. In other words, when did the operation occur? If it occured before filing the Chapter 7, the it is very likely part of the bankruptcy estate.

Since the case is actually being re-opened in New York, your friend will need to figure out what to do. It is likely the case would stay in NY and your friend would need a NY bankruptcy attorney (or at least one admitted for practice in NY). The friend will likely need to shop around for an attorney and see if one will take on this case. Part of the issue is that they were Pro Se, and the Chapter 7 Trustee could say that the debtor should have both listed and exempted the potential lawsuit. But there wasn't a lawsuit at the time (or a claim), so this is why they need an attorney.

Unless your friend just doesn't care and wants the Trustee to do whatever they want to do.

[despritfreya]

I have seen this many times. The cause of action arose pre petition therefore the settlement is property of the bk estate. Unless there is an exemption that covers the asset, it goes to the Trustee for the benefit of creditors.

However. . .

Your friend's case is 7 years old. If it was closed as a no asset case there are no claims on file. The Trustee will issue a claims bar date and mail it to creditors based upon a 7 year old master mailing list. Many notices will come back as undeliverable. In addition, many creditors will simply not file claims because the file is closed.

Bottom line is that depending upon the amount of claims filed and the amount of the settlement recovery, claims may be paid in full and your friend may get something back.

Des.

[dj007]

So yesterday I learned more information about the facts:
the settlement and bk is about his wife and not himself. The class action was against Essure / Buyer as defendant. It was a birth control device procedure that started around 2002 until around 2017 when it was discontinued. His wife got the procedure done around 2008, filed pro-se chapter 7 in NY in 2014 and discharged that same year. No assets case with about $47k in total debt. Around 2018 she learned about the class action and joined, she is to receive about $65k settlement (I believe that is gross with attorneys fees), just a few days ago she learned from the email as stated before that the case is being reopened by the trustee.

A key peace of information is that the FDA inquired hard on complaints against Essure / Buyer procedure in 2015-2016 and the first lawsuits by individuals against Essure / Buyer were filed if not mistaken also in 2015-2016.

So I'm having issue determining the first cause of action as it is understandable that if it occurred pre BK it is a estate asset while post BK it is not.

2008 got the procedure done.
2014 filed chapter 7
2015-16 FDA investigates and first few plaintiff's file lawsuit.
2017-18 I believe the class action got certified by the court.
2018 she learned about the class action and joined it.
2021 settlement is expected to be paid.

So is 2008 when the first cause of action arose ? or is it 2015-16?

Will the new facts change the possible outcome?.

[justbroke]

The cause is the procedure in 2008. That's because the procedure is what the lawsuit/settlement references. See what Des wrote before your last post. It's interesting that a lot of the settlement administrators notify the bankruptcy trustees when someone that is a party to the settlement had filed bankruptcy.

[dj007]

Thanks again, yes I did read Des post, your post and all other replies and they are good appreciated info which will definitely help..., however, I'm still struggling with the cause of action determination.

Assuming I got a job for xyz company in 2008, and in 2014 I give notice to xyz company that I'm soon resigning my position. Then later in 2015-16 I either get unjustly fired or get in a negligent accident while working for xyz, and I then sue xyz in 2017... In analyzing said example, when did the first cause of action arose?

[justbroke]

The cause would have arisen when you were fired... 2015-16. In your hypothetical, you are suing on that basis, I guess, for wrongful termination. Since the termination occurred in 2015-16, then that is when the act which gave cause to the legal action. The cause doesn't arise when any intervening or intermediary act occurs, such as you discovering that there was something actionable from 2015-16. The act is the wrongful termination in your example. When was that act committed? From what you wrote 2015-16. When you file in 2017, you're just filing based on the act that occurred in 2015-2016.

I like to break it down as... what are you suing for? When did it happen?

(I don't understand the resignation in 2014 and then being fired in 2015-2016. That's a little disconnected. Employment law is a very precarious thing anyhow. I'm not expert on employment law and am not an attorney.)

[dj007]

So I guess we both see it from the same angle. the reason I used resignation letter in 2014 in the hypothesis is looking a similar example to grapple the analogy that in the facts presented for the settlement issue, the cause of action arose in 2008 and not 2015-16.

If you compare the facts to the issue to my example above, they are similar chronological situations yet in the bankruptcy issue you identified 2008 as the cause of action date but in the example of employment you determined 2015-16 to be the date the first cause of action arose.

Because I see as 2015-16 to be the first cause of action is why I have difficulty understanding that 2008 instead would be the cause of action determination. And I know the example is not apples to apples comparison but I wanted to use similar dates with different facts...Does it make sense?

[justbroke]

You have to realize it's the event that gave rise to the lawsuit. If you're suing for, let's say, wrongful termination, then the act is the day that you were wrongfully terminated. It is not the day you were employed, because the employment isn't the act which is at issue in the lawsuit. In other words, you're not suing them on wrongful termination because you were hired, you are suing because you were fired subsequently.

In your friend's case, the operation occurred in 2008, so that's when the "event" happened.

[Barbisi]

This is just so upsetting!
Wow, seven long years after a BK7 discharge and the creditors are still entitled to a full pay out -even in a medical malpractice lawsuit settlement?
It sounds like a Bk7 (and maybe a 13 too!) is subject to a lifetime of surveillance by the trustee and court!
So at what point do future medical settlements, life insurance policies, lottery and sweepstakes winnings, job raises ,home sales and inheritances stop being the property of the court?
Does this mean when you are unable to repay 100% of approved claims (as we are ) the trustee and court can retroactively seize any assets you receive for the remainder of your life and your heirs lives?
Bankruptcy apparently has no statue of limitations for collection like filing against a predator, for example, does.
dj007, I wish your relative well and hope they are allowed to keep some if not all of their settlement!

[justbroke]

Wow, seven long years after a BK7 discharge and the creditors are still entitled to a full pay out -even in a medical malpractice lawsuit settlement?

The lawsuit's final judgment is property of the bankruptcy estate. That it takes years for the lawsuit to be settled or come to a judgment is inconsequential. There are many people that are in Chapter 7s which have not yet closed.

Remember, the discharge is the prize.

It sounds like a Bk7 (and maybe a 13 too!) is subject to a lifetime of surveillance by the trustee and court! So at what point do future medical settlements, life insurance policies, lottery and sweepstakes winnings, job raises ,home sales and inheritances stop being the property of the court?

First it's not future medical settlements, life insurance policies, lotteries, home sales, inheritances or job raises, or anything else. These are all well defined in the bankruptcy code, but let's pick them apart.

• inheritances - Generally no. These are only part of the bankruptcy estate if the debtor become entitled to receive this within 180 days of the filing of the bankruptcy (Chapter 13s are a little different)
• life insurance policies - Generally no. Unless the debtor died and this is the estate cleaning up the debtor's debt.
• home sales - No. The value of the home is set at the time of filing (or a specific hearing on valuation).
• lottery and sweepstakes - No. Despite anything you read on the internet, unless the lottery was won before filing, then it is not part of the bankruptcy estate. There is an exception for Chapter 13 since those are basically "pending" bankruptcies.
• medical settlements - It depends. It depends on when the cause which gave rise to the lawsuit/claim arises. That's fancyspeak for saying that the injury must have happened before the bankruptcy was filed (Same exception for Chapter 13 since they are "pending" bankruptcies.)

And, it's not a lifetime of surveillance. There is absolutely no surveillance. The fact is that it's neither the Trustee nor the Court that is watching this. The settlement administrator -- assigned for major class action lawsuits -- take claims and they match them against bankruptcy records during the period in which the claim arose. It is the settlement administrators that report to the Trustee (or the United States Trustee) that there was a claim.

Does this mean when you are unable to repay 100% of approved claims (as we are ) the trustee and court can retroactively seize any assets you receive for the remainder of your life and your heirs lives?

No, it does not mean that at all. We have to remember that everything prior to filing, and some very-specific things within 180 days of filing, may be property of the bankruptcy estate. Entitlement to the proceeds of a lawsuit is one of those things. This is why the Statement of Financial Affairs requires a debtor to list all pending and past litigation to disclose these lawsuits.

Bankruptcy apparently has no statue of limitations for collection like filing against a predator, for example, does. dj007, I wish your relative well and hope they are allowed to keep some if not all of their settlement!

There are limitations on many claims in a bankruptcy, including denying a discharge (it's typically one year from the discharge to bring a complaint to revoke the discharge). This is not about the discharge. This is about property of the bankruptcy estate. Whether or not the settlement can be kept is a matter of (likely) State bankruptcy exemptions.

The simple fact is that usually, a debtor knows that they are in a lawsuit. That lawsuit is listed on the Statement of Financial Affairs (SOFA). The Trustee assigned to the case reviews the SOFA, looks at any pending (or past) lawsuits, and makes a determination as to whether or not they want to a.) substitute themselves as the plaintiff, or b.) abandon any claim to the lawsuit. This is probably a good 99.999% of cases where the lawsuit is known at the time. Think of a car accident, or a workplace accident where the date is certain at the time of filing.

A lawsuit that arises after the bankruptcy because of a product-safety issue (think asbestos, and the mesh issue), that doesn't change the fact that if it arose prior to the bankruptcy filing, that it's property of the bankruptcy estate.

This simply doesn't happen that often. This is a rather rare case. The only reason that the Trustee knows about the suit, is because the settlement administrator contacted the trustee (or UST).

I would rather have my $1MM+ discharge, than the proceeds from any < $100,000 lawsuit (or even a $1,000,000 settlement). The prize is the discharge of the larger amount.

As Des wrote, when the Trustee sends out the notice instructing these old creditors to file claims, it's possible that not many will even respond or even exist any longer. The debtor may still receive some portion of the proceeds which is a win!

[Barbisi]

Thanks for the detailed explanation,jb!
Long before bk13 existed even as an afterthought in our lives (in 2001), my late mother and I each received a relatively small class action settlement for creosote contamination in her Louisiana house (sold in 2002). All of these funds were spent prior to leaving Texas (in 2004) so we did not need to inform the attorney or trustee of their distribution and there is no chance we could collect any further monies even if we had developed or will develop cancer or other fatal conditions arising from the exposure to the carcinogenic causing chemical.
The thought that were we to get compensation in the future for something like that which happened before 2017, and that the entire amount could be subject to 100% seizure, just doesn't sit well with me.
What if the debtor developed cancer or had massive injuries and couldn't work at all and needed to pay for long term, ongoing care? If the court appropriates the funds, then the recipient would have to refile BK13 (or 7) just to get out from under huge medical bills that the settlement was designed to cover in the first place. Hardly fair!
And I know the argument is simply that the law is the law and can not be changed, but that doesn't make it right!
This is why I will always hate being bankrupt - like in a gambling house, the deck is always stacked against you , and the only way out to stay debt free to the best of your ability. And should you end up with $$$$$$ bills for life saving medical treatment, try to raise money through a GoFundMe campaign or the like before turning to the (not so) easy way out -any bankruptcy chapter!
Only my very humble opinion, so no attacks, please!