{"id":1466,"date":"2015-04-21T20:03:12","date_gmt":"2015-04-21T20:03:12","guid":{"rendered":"http:\/\/www.westcoastbk.com\/blog\/?p=1466"},"modified":"2015-04-21T20:03:12","modified_gmt":"2015-04-21T20:03:12","slug":"potential-lawsuit-claims-need-to-be-listed-when-filing-bankruptcy-and-are-part-of-the-bankruptcy-estate","status":"publish","type":"post","link":"https:\/\/www.westcoastbk.com\/blog\/2015\/04\/potential-lawsuit-claims-need-to-be-listed-when-filing-bankruptcy-and-are-part-of-the-bankruptcy-estate\/","title":{"rendered":"Potential Lawsuit Claims Need to be Listed When Filing Bankruptcy and Are Part of the Bankruptcy Estate"},"content":{"rendered":"

By Ryan C. Wood<\/a><\/p>\n

Preparing a bankruptcy petition and filing for bankruptcy is actually a much more complicated process than most believe. Of course there are certain cases that really do not require too much work, but even those cases could have hidden landmines. One of the landmines I speak of is a bankruptcy filer\u2019s claims or potential claims against a third party for damages (Money!!!). Most clients do not think about a potential claim as part of their assets. It is just the right to sue so . . . . . . . . The claim or potential claim could derive from an employment issue at work, slip and fall at a store or business, fraud, breach of contract or other way any of us can be hurt financially and potentially have a claim against a third party. Yes, your right to sue someone is a claim that should be listed in the bankruptcy petition schedules and could have value to be protected depending upon the circumstances. What happens if a claim is not listed in the bankruptcy petition schedules? A recent Ninth Circuit Bankruptcy Appellate Panel case discusses the treatment of an unlisted claim when the bankruptcy filer, after discharge and the case was closed, attempts to enforce the claim by filing a lawsuit. Goldstein v. Alberta P. Stahl, Chapter 7 Trustee; Wells Fargo Bank, N.A.; Bank of America, N.A.; BAP No. CC-14-1346-TaDPa, March 3, 2015.<\/p>\n

What are Claims?<\/strong><\/p>\n

A claim when filing for bankruptcy is defined as the right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured.<\/p>\n

So a potential claim is the potential right to payment for damages that you have not yet filed a lawsuit for and obtained a judgment is an unliquidated and most likely disputed claim. A claim no less though. Sierra Switchboard Co. v. Westinghouse Elec. Corp., 789 F.2d 705, 707 (9th Cir. 1986)<\/p>\n

Property of the Bankruptcy Estate<\/strong><\/p>\n

Section 541 of the Bankruptcy Code provides what is property of the estate. Part of the definition includes: Any interest in property that would have been property of the estate if such interest had been an interest of the debtor on the date of the filing of the petition, and that the debtor acquires or becomes entitled to acquire within 180 days after such date, by bequest, devise, or inheritance; as a result of a property settlement agreement with the debtor\u2019s spouse, or of an interlocutory or final divorce decree; or as a beneficiary of a life insurance policy or of a death benefit plan. <\/p>\n

As you can see this definition includes all property at the time the case is filed to be listed in the bankruptcy schedules. In the Goldstein case one of the issues was whether the right to sue their mortgage companies arose prior to the chapter 7 bankruptcy case being filed. Of course the Goldstein\u2019s bankruptcy attorney<\/a> argued the right to sue arose after the case was filed. The mortgage companies bankruptcy lawyers<\/a> argued the claims arose before the chapter 7 case was filed.<\/p>\n

Goldstein v. Alberta P. Stahl, Chapter 7 Trustee; Wells Fargo and Bank of America<\/strong><\/p>\n

Long story short the bankruptcy filer\u2019s in this case, the Goldstein\u2019s, applied for a loan modification prior to filing for relief under chapter 7 of the Bankruptcy Code. They fulfilled the terms of the temporary loan modification but their mortgage company never provided them a permanent loan modification. The Goldstein\u2019s paid over $22,000 in mortgage payments in reliance upon their mortgage companies offer to modify their mortgage though. This is the claim the Goldstein\u2019s allegedly had at the time their chapter 7 case was filed against their mortgage companies. For whatever reason the Goldstein\u2019s did not list this claim in their bankruptcy schedules and their case was discharged and closed. The Goldstein\u2019s then sued their mortgage companies for the mortgage payments and other causes of action. Their mortgage companies used the defense that the claim was not listed in their bankruptcy schedules so the claim was actually still property of the bankruptcy estate and could not be pursued by the Goldstein\u2019s. The Goldstein\u2019s then reopened their bankruptcy case to add the claim to their schedules. As part of reopening the bankruptcy case a chapter 7 trustee was appointed to the case again. The Goldstein\u2019s mortgage companies then entered in to negotiations for the settlement of the claim with the chapter 7 trustee and sought to extend the deadline for the chapter 7 case to close again. Eventually the chapter 7 trustee filed a motion to compromise the claims or sell the claim free and clear. The Goldstein\u2019s opposed arguing the claims did not become complete until their mortgage companies denied the permanent loan modification two weeks after the bankruptcy case was filed. Given that the claims should not be part of the bankruptcy estate. The bankruptcy court held the alleged breach by the mortgage companies was before the bankruptcy case was filed when they failed to grant a permanent loan modification. To determine when a cause of action accrues, and therefore whether it accrued pre-bankruptcy and is an estate asset, the Court looks to state law.\u201d Boland v. Crum (In re Brown), 363 B.R. 591, 605 (Bankr. D. Mont. 2007) Under California law a cause of action accrues upon the occurrence of the last element essential to the cause of action.\u201d Howard Jarvis Taxpayers Assn. v. City of La Habra, 25 Cal. 4th 809, 815 (2001) The Ninth Circuit Bankruptcy Appellate Panel upheld the bankruptcy court\u2019s ruling that the claims are property of the estate. The panel noted that the third mortgage payment was made by the Goldstein\u2019s prepetition and that is when they could have brought their lawsuit at that time. <\/p>\n","protected":false},"excerpt":{"rendered":"

When filing for bankruptcy all assets at the time of filing should be listed in the bankruptcy petition. This is includes claims like potential lawsuits that can be filed. The Ninth Circuit Bankruptcy Appellate Panel recently addressed this issue. <\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[101,12,47,52],"tags":[118,239,190,240],"_links":{"self":[{"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/posts\/1466"}],"collection":[{"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/comments?post=1466"}],"version-history":[{"count":4,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/posts\/1466\/revisions"}],"predecessor-version":[{"id":1470,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/posts\/1466\/revisions\/1470"}],"wp:attachment":[{"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/media?parent=1466"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/categories?post=1466"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/tags?post=1466"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}