Plaintiff failed to disclose her lawsuit on her Chapter 7 petition

[boaisy]

We are being sued in the Middle District of Florida for ~20k. Nine months after filing the lawsuit, plaintiff filed for Chapter 7 bankruptcy in the same jurisdiction. She listed ~7k in assets and ~65k in liabilities. She is using a different, unaffiliated attorney for her BK as the trial attorney for the lawsuit. I do not believe her trial attorney knows about her BK. Are we obligated to notify the BK Trustee that she failed to disclose? Or should we move to dismiss the lawsuit since the potential assets from the lawsuit now belong to the estate?

[justbroke]

If you're a creditor, then maybe the creditor attorney should contact the Plaintiff's BK attorney, as a courtesy. Find out whether the lawsuit was scheduled in the complaint. I'm assuming by "Middle District of Florida" you're not being sued in federal court since the amount is only $20K.

You need legal counsel. If you are in the middle of the lawsuit and received the Notice of Bankruptcy then there are several other things that you should or shouldn't do. The attorney should have a chat. Perhaps it is scheduled and has been properly exempted from the bankruptcy estate.

There is not enough information to even speculate, and I don't like speculating.

[boaisy]

Thanks for the advice!

[despritfreya]

We are being sued in the Middle District of Florida for ~20k. Nine months after filing the lawsuit, plaintiff filed for Chapter 7 bankruptcy in the same jurisdiction. She listed ~7k in assets and ~65k in liabilities. . . Are we obligated to notify the BK Trustee that she failed to disclose? Or should we move to dismiss the lawsuit since the potential assets from the lawsuit now belong to the estate?

This happens quite frequently. Plaintiff/Debtor tries to get away with something by failing to disclose the asset.

As you know, on the day the Chapter 7 was filed the control over the litigation from the Plaintiff's side, transferred to the Chapter 7 Trustee.

A 12b Motion would be appropriate as the Debtor is not the proper party Plaintiff and has no standing to proceed in the litigation. A copy of the MTD should be mailed to the proper party. Once the Chapter 7 Trustee is notified, he/she could respond to the MTD and substitute in, or could let the case get dismissed.

Alternatively, and I think the better route, is to contact the Trustee and then settle the litigation for some token payment so that your client has a final resolution of the matter.

Either way, your client will want finality to the situation. This means resolving the matter with the Trustee (the proper party Plaintiff).

Des.

[boaisy]

This happens quite frequently. Plaintiff/Debtor tries to get away with something by failing to disclose the asset.

As you know, on the day the Chapter 7 was filed the control over the litigation from the Plaintiff's side, transferred to the Chapter 7 Trustee.

A 12b Motion would be appropriate as the Debtor is not the proper party Plaintiff and has no standing to proceed in the litigation. A copy of the MTD should be mailed to the proper party. Once the Chapter 7 Trustee is notified, he/she could respond to the MTD and substitute in, or could let the case get dismissed.

Alternatively, and I think the better route, is to contact the Trustee and then settle the litigation for some token payment so that your client has a final resolution of the matter.

Either way, your client will want finality to the situation. This means resolving the matter with the Trustee (the proper party Plaintiff).

Des.

Thank you for clarifying. From what I have researched, the 11th Circuit has used the "real party in interest" basis for dismissing pre-petition lawsuits like these.

So if we notify the Trustee and negotiate a settlement directly with him, he will still have to voluntarily the complaint, correct? And the plaintiff will be barred from filing another lawsuit?

[despritfreya]

So if we notify the Trustee and negotiate a settlement directly with him, he will still have to voluntarily the complaint, correct? And the plaintiff will be barred from filing another lawsuit?

The Trustee steps into the shoes of the Debtor. You settle. Any settlement must be approved by the bankruptcy court (See Bankruptcy Rule 9019). The Trustee will prepare the 9019 Motion. Presumably, as part of the settlement, upon approval of the 9019 compromise in the bankruptcy court, the Trustee will move to dismiss the District Court proceeding with prejudice. That gives your client finality.

Des.

[boaisy]

The Trustee steps into the shoes of the Debtor. You settle. Any settlement must be approved by the bankruptcy court (See Bankruptcy Rule 9019). The Trustee will prepare the 9019 Motion. Presumably, as part of the settlement, upon approval of the 9019 compromise in the bankruptcy court, the Trustee will move to dismiss the District Court proceeding with prejudice. That gives your client finality.

Des.

Thank you once again. That is very helpful.

[despritfreya]

Thank you once again. That is very helpful.

You are very welcome.

Des.