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Bankruptcy Filer Not Estopped From Pursuing Truck Accident Lawsuit - Al-Mansoob v. Malloy

November 12, 2012

Vincent Howard and our Moreno Valley personal bankruptcy lawyers were interested to see a case involving a man who didn't claim a pending lawsuit as an asset on his bankruptcy petition. Many people who are unfamiliar with bankruptcy might wonder why a lawsuit counts as an asset, but because plaintiffs have the potential to gain money, they are legally required to notify the court when they have suits pending. In Al-Mansoob v. Malloy, the Sixth U.S. Circuit Court of Appeals found that Senan Al-Mansoob should not be stopped from pursuing a legal claim against a trucker and trucking company he claims were at fault for hitting him Al-Mansoob left the claim off his petition inadvertently, the court found, and in any case the bankruptcy trustee was not judicially estopped from pursuing it because the trustee was blameless.

Al-Mansoob was in an accident with truck driver Matthew Malloy, who was working at the time for Wilburn Archer Trucking, Inc. He filed a lawsuit in July of 2009; he had a separate lawsuit against State Farm Insurance. Two months after the Wilburn Archer lawsuit, he filed for Chapter 7 bankruptcy. On the petition, he listed the suit against State Farm among his assets, but not the claim against Wilburn Archer and Malloy. Later amendments didn't add them, and he was granted a discharge in March of 2010. In July of that year, Wilburn Archer moved to dismiss the lawsuit, arguing that Al-Mansoob was judicially estopped from pursuing the lawsuit because he failed to disclose it in his bankruptcy filing, thus creating two contradictory positions in the different cases. Al-Mansoob replied that his failure was inadvertent because he didn't understand the difference between this suit and the State Farm suit. He also claimed he had discussed it many times with the bankruptcy trustee, creating a kind of notice. The court granted summary judgment to the trucking defendants.

The bankruptcy trustee stepped in and moved for reconsideration, arguing that he was the real party in interest and should not be judicially estopped; he also repeated that the omission was inadvertent. The court denied this and the trustee appealed.

The Sixth U.S. Circuit Court of Appeals reversed, finding merit in both of the trustee's arguments. Several federal appeals courts have agreed that bankruptcy trustees should not be judicially estopped from pursuing cases because of the bankruptcy filer's misconduct, the court noted. In this case, the trustee was the real party in interest as soon as the bankruptcy was filed, the Sixth said. Thus, pursuing this action is not contradictory for the trustee, regardless of what Al-Mansoob may have done. Furthermore, it said, Al-Mansoob presented evidence that he didn't act in bad faith, though it was untimely. This made his case distinguishable from White v. Wyndham Vacation Ownership Inc., a similar case decided just days before a hearing for Al-Mansoob. Using this evidence, the Sixth found nothing to suggest bad faith in Al-Mansoob's actions. Thus, it reversed the district court.

Vincent Howard and our Irvine consumer bankruptcy attorneys are pleased to see a reversal that permits the case to go forward. However, we want to take the opportunity to caution our clients that it's vital to tell us--or any other bankruptcy lawyer you might hire--all about your financial life, even things that don't seem important. If Al-Mansoob had been clearer or more exact in his filing, none of this would have come to pass. Of course, disclosing the lawsuit to the trustee means that Al-Mansoob, and others in his position, will be obliged to turn over any proceeds of the lawsuit to creditors. However, this sometimes means the bankruptcy filer can keep other assets, and it does mean that the defendants in the underlying lawsuit will not be able to escape accountability with a procedural argument. At Howard Law, our Ontario individual bankruptcy lawyers go over our clients' bankruptcy filings carefully to ensure there's little chance of problems like these.

If you're feeling overwhelmed by your debt and you'd like to speak with Vincent Howard and our experienced team of attorneys about a bankruptcy, don't wait to call. You can reach us at 1-800-872-5925 or send us an email today.

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