Look before you leap (or declare) in the law; one reason why is judicial estoppel

5 June 2020

People too often make statements, declarations, and take positions in legal matters without properly realizing the impact or ramifications of same.  Here we have one story of how a debtor in bankruptcy was held to their declaration.

In In re Ciampa the debtor filed four different chapter 13 plans, each of which categorizing a debt obligation arising from a divorce as a domestic support obligation, the last plan being confirmed by the court.  In re Eric M. Ciampa, Case No. 16-10913-FJB, April 24, 2020).  The debtor had two ways to categorize the debt to choose from, one as he had, a domestic support obligation, and the other being a property settlement.  This is important because a chapter 13 debtor can discharge, or wipe out, a property settlement, but not a domestic support obligation.  It is also important because arguably a domestic support obligation must be paid, and thus would reduce the amount other creditors may be entitled to under a chapter 13 plan.  In other words, in a sense having a debt characterized as a DSO benefits the debtor when preparing his chapter 13 plan.

Some time later while the case was still on-going, the debtor sought to have this debt obligation determined to be a property settlement, as opposed to his previous characterization of it, presumably to discharge it in the bankruptcy.  The reasons for the timing is unknown.

The court rejected the debtor’s efforts to categorize the debt as a property settlement due to the doctrine of judicial estoppel, inter alia.  This is a court created doctrine that serves fairness and essentially does not permit a person to claim something is one way and benefits and then change their tune and benefit in another way later.  Guay v. Burack, 677 F.3d 10, 17 (1st Cir. 2012) (judicial estoppel precludes a party from advancing a position where (i) that position is directly inconsistent with one he advanced earlier and (ii) he succeeded in persuading the court to accept that prior position).  The court pointed out the debtor’s prior characterization and how he benefitted from it in having his plan confirmed.

Judicial estoppel is fair and stops injustice, but many people feeling the brunt of its impact have failed to appreciate the significance of taking that initial position or claim, and think that they could always simply change their position later.  The lesson is that the law is not like an Etch-A-Sketch or sand on the beach that a person can erase their prior actions to start over.  And that anyone delving into the legal arena should pay close attention to their steps.