Am I required to amend my schedules with newly acquired assets during a chapter 13 bankruptcy?

7 February 2016

Yes, you are required under bankruptcy law to do so, especially in Massachusetts where post-petition assets become part of the bankruptcy estate.

Another very good reason to list assets acquired post-petition in a chapter 13 is to avoid falling victim to the doctrine of judicial estoppel. Judicial estoppel exists to protect the integrity of the judicial system and is designed to stop a party from taking one position in one judicial proceeding and the opposite in another. “Judicial estoppel is an equitable doctrine invoked by a court at its discretion.” New Hampshire v. Maine, 532 U.S. 742, 750 (2001). It has an “amorphous nature” and a trial court is in the best position to evaluate whether it applies because “determining whether a litigant is playing fast a loose with the courts has a subjective element [and] [i]ts resolution draws upon the trier’s intimate knowledge of the case at bar and his or her first-hand observations of the lawyers and their litigation strategies.” Id. Although “the circumstances under which judicial estoppel may appropriately be invoked are probably not reducible to any general formulation of principle” there are three factors the United Supreme Court has enunciated for courts to use to evaluate in determining whether it applies. Id. at 750-51.

The first factor is whether a party has taken a position in a subsequent judicial proceeding that is directly inconsistent with an earlier position. The second is whether the initial court adopted the party’s initial position so that if a later court were to adopt a contrary position subsequently it would give the perception the court has been misled. The third factor is whether the change in position has given the party an unfair advantage or caused a detriment to the opposing party. Id. at 750-51.

So, how does judicial estoppel typically apply to chapter 13 cases, you ask? Well a chapter 13 debtor obtains a legal claim, for some reason it seems many times to be an employment claim or some sort of tort based claim, and does not amend their petition to add it and then pursues the claim in a different case after the bankruptcy case has closed. See e.g. Jones v. Bob Evans Farms, Inc., No. 15-2068, 2016 WL 308650 (8th Cir. Jan. 26, 2016); Stalings v. Hussmann Corp., 447 F.3d 1041 (8th Cir. 2006). Understand that a conscientious employment defense lawyer will check to see if a plaintiff has filed bankruptcy previously to see if the claim the plaintiff raises now was listed in the bankruptcy. If not, then the defense lawyer can argue judicial estoppel applies and the plaintiff loses his claim.

The moral of the story is to be consistent, tell the truth, and make sure that what you sign is accurate. Barger v. City of Cartersville, 348 F.3d 1289, 1295 (11th Cir.2003) (finding attorney’s neglect in omitting asset from bankruptcy schedule not sufficient reason to not attribute omission to party when considering whether judicial estoppel applied).

In the event that you believe that someone may accuse you of not being consistent in different cases or you think someone else has not been, feel free to give this office a call.