Law Office of Malik W. Ahmad

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Stop the lawsuit if plaintiff filed bankruptcy—Judicial estoppel

You can stop the lawsuit if your Plaintiff had filed Bankruptcy—Judicial Estoppel?

Let us see if your client just received a summons and complaint and ask you if you can defend him in this lawsuit. We had this scenarios repeated many times in our Law Office of Malik Ahmad. We do not only file chapter 7, chapter 13, or chapter 11, but extensively deals in bankruptcy and general business and civil litigation at our law office. As your diligent attorney, we feel incumbent to find out if your plaintiff had recently filed bankruptcy. This is on our checklist..

If the plaintiff recently filed bankruptcy, but did not disclose it to you, he/she is major trouble—well, you might be able to raise a defense of judicial estoppels defense. Of course, an iron clad defense

What is Judicial Estoppel?

It is an equitable doctrine which means that a party can be stopped from maintaining inconsistent position in legal proceedings.  As you may know now, the bankruptcy law requires that a debtor who seeks its protection discloses all of his or her assets, including known causes of legal action and that includes a potential cause of legal action—the right to sue someone bases on a protected legal right or merit.

A debtor who fails to disclose is taking the position that and represent that such legal action does not exist. However, if the same debtor, now plaintiff asserts or continues to prosecute the unrevealed cause of action in another forum, he or she is saying just the opposite. Now, he/she is pole apart from his previous judicial stand. The court would come and intervene and stop him/her from this inconsistent position.

What the Bankruptcy Code states about existing cause of action?

The Bankruptcy Code demands complete disclosure from a debtor who seeks its protection. Ajaka v. Brooksamerica Mortgage Corp, 453 F3d 1339, 1344 (11th cir 2995). For example, the Bankruptcy Code requires that a debtor file under oath and penalty of perjury a list of all assets and liabilities and a statement of financial affairs (the “schedules”. The Code also requires that the debtor attend a meeting of creditors, where he must testify under oath on the matters contained in his schedules.

Only Trustee has the power to prosecute claims

When a person files bankruptcy, at least in Chapter 7, those actions belong to the bankruptcy estate, not the debtor. Only the trustee has the standing to prosecute those claims. If a cause of action exists, the trustee decides whether there is enough value to the creditors to justify prosecuting the, and if abandoning would be a better idea. Sometime, the property is too small to litigate, and the trustee may abandon it.

 What Judicial Estoppel Means?

(1) Two position taken by the same party;

(2) in judicial proceedings

(3) under oath,

(4) with the party successfully maintaining the first position and receiving some benefits even though

(5) the two positions are inconsistent.