by Andy Jones
Many times, if a person has a bankruptcy in their past, it most often has implications in areas of the law other than personal injury, like in a real estate transaction. Or, if it comes up in personal injury, a bankruptcy is most likely to have an impact post-settlement or judgment only. Right?
Not necessarily. In certain situations, a person’s filing for bankruptcy and failing to disclose a potential or active personal injury claim in the bankruptcy proceedings could judicially estop them from pursuing a personal injury lawsuit. Here is what you need to know to advise a client about the impact a past (or pending) bankruptcy could have on their personal injury case.
First, judicial estoppel is a common law doctrine used to prevent a party from assuming inconsistent positions in different courts and cases on the same issue. The elements of judicial estoppel are:
- the party to be estopped has taken a position clearly inconsistent with its previous position;
- the previous court must have accepted the previous position; and
- the party to be estopped has acted intentionally, not inadvertently.
For the purposes of this article, the focus is on the first element – taking an inconsistent position – and the role a bankruptcy proceeding can play in establishing or disproving that element.
The U.S. Bankruptcy Code places an affirmative duty on a debtor in bankruptcy to disclose assets, including contingent and unliquidated claims. This includes potential personal injury claims. Therefore, if a bankruptcy debtor has a personal injury claim – or knows of the potential for one in which they have an interest – they have a duty to disclose it to the bankruptcy court.
This rule is not absolute, and its application depends on the type of bankruptcy filed.
There are generally three types of bankruptcies – Chapter 7, Chapter 11, and Chapter 13. When a person files for Chapter 7 Bankruptcy, a bankruptcy estate is formed at the time of the filing of the petition for bankruptcy. Importantly, post-petition legal claims, e.g. personal injury claims, are the property of the Chapter 7 Bankruptcy petitioner and not the bankruptcy estate. A legal claim, without roots in the time before the petition, is not part of the bankruptcy estate. To include such claims is inconsistent with the Bankruptcy Code and public policy – especially for post-petition personal injury claims. A Chapter 7 Bankruptcy estate does not include assets (including legal claims) acquired after a Chapter 7 Bankruptcy petition is filed.
In a Chapter 7 Bankruptcy, a petitioner must schedule all of their interests in property (including claims or causes of action) as of the commencement of the bankruptcy case for their inclusion in the bankruptcy estate. A Chapter 7 Bankruptcy petitioner has no duty to disclose or amend their schedules with any property (including persona injury claims) acquired after the date of filing the petition for Chapter 7 Bankruptcy.
Thus, not including a post-petition asset or claim in a Chapter 7 Bankruptcy schedule is not an inconsistent position for judicial estoppel. For example, in the In re Wakefield case, the Chapter 7 Bankruptcy petitioner did not include on his schedules a claim for wrongful termination which accrued after filing his bankruptcy petition. The defendant in the wrongful termination claim moved to dismiss the wrongful termination claim based on judicial estoppel for failing to disclose the claim on the bankruptcy schedules. However, the bankruptcy court held that the wrongful termination claim did not exist prior to filing the bankruptcy petition. Therefore, petitioner was not required to disclose the claim and, as such, did not take an inconsistent position under the doctrine of judicial estoppel. Notably, the In re Wakefield case is sharply critical of the Coastal Plains case.
Judicial estoppel has been found to be inapplicable to other cases involving post-petition claims not included in a bankruptcy proceeding. For example,
- Sherman v. Wal–Mart Associates, Inc. – A post-petition claim for employment discrimination was not property of the Chapter 7 bankruptcy estate and was not required to be disclosed in the bankruptcy proceeding. Thus, judicial estoppel was inapplicable as no inconsistent position was taken.
- Tate v. Veolia Transp. Services, Inc.– Post-petition employment discrimination and retaliation claims were not part of the Chapter 7 Bankruptcy estate and were not required to be disclosed in the bankruptcy proceeding. Thus, judicial estoppel was not applicable as no inconsistent position was taken.
- Lone Star Engine Installation Ctr., Inc. v. Gonzales  – judicial estoppel inapplicable in a case where bankruptcy petitioner did not disclose post-petition civil claims for car repairs against a bankruptcy creditor.
- See also In re Wakefield, supra.
Key to addressing this issue with a client is to determine under which Chapter of the Bankruptcy Code filed for bankruptcy. If a client filed a Chapter 7 Bankruptcy petition, the rules of Chapter 7 apply – not Chapter 11 or Chapter 13. But, if a client filed under Chapter 11 or 13, judicial estoppel likely applies. For example, in Horsley-Layman v. Adventist Health Sys./Sunbelt, Inc., a medical malpractice claimant failed to disclose her medical malpractice claim in a Chapter 13 Bankruptcy case. The Horsley-Layman Court assessed the estoppel issue under Chapter 13 Bankruptcy and not under Chapter 7 Bankruptcy. Based on a Chapter 13 analysis, the Fort Worth Court of Appeals held that judicial estoppel applied. However, if a client filed under Chapter 7, and the facts of the personal injury arose post-petition, failing to disclose it is not an inconsistent position for purposes of judicial estoppel.  And, if there is no inconsistent position taken, then the first element is not met, and judicial estoppel does not apply.
In the end, the most important issues when advising a client on the impact a bankruptcy may have on their personal injury claim are:
- What kind of bankruptcy did your client file?
- When did they file it?
- When did the personal injury occur?
- When, if it has, did the bankruptcy proceedings conclude?
Knowing those key facts, and the application of the three types of bankruptcies to those facts, will go a long way in advising your client and protecting their potential claim.
Andy Jones is a Trial Attorney at Sawicki Law and President-Elect of the Dallas Association of Young Lawyers. He can be reached at email@example.com.
 Cricket Communications, Inc. v. Trillium Industries, Inc., 235 S.W.3d 298, 304 (Tex. App.—Dallas 2007, no pet.).
 Id. at 304–305.
 To learn more about the elements of Judicial Estoppel please see “You Can’t Say That! What you Need to Know About Judicial Admissions and Estoppel,“DAYL Dicta, July 2017.
 Cricket Communications, Inc., 235 S.W.3d. at 304-305.
 See Horsley-Layman v. Adventist Health System/Sunbelt, Inc., 221 S.W.3d 802, 805-806, 808 (Tex. App.—Fort Worth 2007, pet denied) (internal citations omitted).
 11 U.S.C. 301(a); 11 U.S.C. 541(a).
 In re Rhinesmith, 450 B.R. 630, 632 (Bankr. W.D. Tex. 2011); In re Durrett, 187 B.R. 413, 416 (Bankr. D.N.H. 1995).
 Id. at 632-34; see also In re Doemling, 127 B.R. 954, 955 (W.D. Pa. 1991) (holding that a motor vehicle collision claim accruing five months after bankruptcy petition filing was not part of the bankruptcy estate).
 See id. at 636.
 Harris v. Viegelahn, 575 U.S. 510 (2015); see also In re Wakefield, 312 B.R. 333, 338 (Bankr. N.D. Tex. 2004).
 In re Wakefield, 312 B.R. at 337 (citing 11 U.S.C.541(a)(1)).
 Id. at 339; see also In re Davis, 253 F.3d 807, 810 (5th Cir. 2001); Sherman v. Wal–Mart Associates, Inc., 550 B.R. 105, 109 (N.D. Tex. 2016); Tate v. Veolia Transp. Services, Inc., 2010 WL 11598051 at *10 (W.D. Tex. 2010); In re Doemling, 127 B.R. at 955; Lone Star Engine Installation Ctr., Inc. v. Gonzales, 2016 WL 2765079 at *8 (Tex. App.—Dallas 2016), judgment set aside, opinion not vacated sub nom. Lone Star Engine Installation Ctr., Inc v. Gonzales, 2016 WL 2941172 (Tex. App.—Dallas May 2016, pet. denied).
 In re Wakefield, 312 B.R. at 335, 337-8.
 Id. at 336.
 Id. at 337-8.
 Id. at 338-9.
 550 B.R. 105, 109 (N.D. Tex. 2016).
 This case affirmatively cites In re Wakefield.
 2010 WL 11598051 at *9-11.
 2016 WL 2765079 at *8.
 See, supra, ¶¶ 10-12; see also In re Wakefield, 312 B.R. at 338 (stating that the provisions of Ch. 11 do not apply to Ch. 7 bankruptcies).
 Horsley-Layman v. Adventist Health Sys./Sunbelt, Inc., 221 S.W.3d at 805.
 See, e.g., In re Wakefield, 312 B.R. at 335, 337-8 (holding petitioner has no duty to disclose post-petition assets or claims).
 In re Wakefield, 312 B.R. at 339; Sherman, 550 B.R. at 109; Tate, 2010 WL 11598051 at *10; Lone Star Engine Installation Ctr., Inc. v. Gonzales, 2016 WL 2765079 at *8.
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