New Bankruptcy Case Every Accident and Malpractice Lawyer Should Know

The 11th Circuit Court of Appeals decided the question of whether a debtor’s claims for legal relief that arose after the confirmation but before the completion of his plan to pay creditors are property of the estate, under Chapter 13 of the Bankruptcy Code.

In this case, after the debtors’ joint Chapter 13 plan was confirmed, the joint-debtor husband was involved in a car accident and suffered personal injuries. The bankruptcy court approved the $25,000 claim against the at-fault driver. Debtors then sought authority to settle the uninsured motorist claims arising out of the car accident without further approval from the bankruptcy court because the car accident happened after the confirmation, and accordingly, the claims vested in the debtor and were not subject to the bankruptcy proceedings.

The court addressed two distinct issues: (1) whether the husband’s underinsured-motorist benefits are property of the estate, and (2) whether the bankruptcy court erred when it required both the husband and the wife to amend their schedules of assets to disclose the husband’s claim and partial settlement.

With respect to the first issue, the 11th Circuit affirmed the lower courts finding that post-confirmation assets “remain” property of the estate. The court found the husband acquired his claims for underinsured-motorist benefits after the commencement of the bankruptcy case but before their case was dismissed, closed, or converted, and that if Congress intended for confirmation to so dramatically affect the expansive definition of property of the estate, it could have easily done so.

With respect to the latter issue, the court found that the Bankruptcy Court did not abuse its discretion by requiring the couple to amend their schedule of assets. On this issue, the court simply found that the law clearly recognizes a debtor’s continuing duty to disclose changes in his financial situation while the bankruptcy is pending.

Our law firm handles only personal injury cases. I think this is the best way to practice law; I cannot imagine trying to be the jack of all trades in 2008 because there is simply too much that personal injury lawyers need to know just in handling malpractice and accident claims. But the downside is that everything I learned about bankruptcy law I learned in the day I started my Debtor-Creditor class, only to drop it because it was way too boring.

I think the key for personal injury lawyers is not in knowing bankruptcy law but in issue spotting. You don’t need to understand the bankruptcy code but you do need to be able to spot issues. In this case, if you have an accident or malpractice client whose bankruptcy has not been fully completed, you have an issue you need to address.

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  • Pat Baldwin

    Something I would have never thought about! Thanks.

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