Personal Injury Claims, Judicial Estoppel, and Consumer Bankruptcy

When you file for personal bankruptcy, do you have to disclose information about pending personal injury lawsuits? And if you fail to disclose to the bankruptcy court that you have a cause of action that hasn’t yet been decided, can judicial estoppel prevent you from moving forward with your claim? Generally speaking, the judicial estoppel doctrine (which we’ll discuss shortly), is supposed to prevent debtors from “playing fast and loose with the courts,” according to an earlier case from the 7th Circuit.
Now, the Illinois Supreme Court will decide whether a recent bankruptcy case included the required elements of judicial estoppel, thus preventing the plaintiffs from moving forward with their personal injury claim. The case, Seymour v. Collins, concerns a married couple that filed for Chapter 13 bankruptcy. They ultimately received a discharge, but they didn’t disclose information about a pending personal injury claim.
Details of Seymour v. Collins
In Seymour v. Collins, the plaintiffs, a married couple, filed a petition for Chapter 13 bankruptcy in 2008, and the plan was confirmed. In May of 2009, the husband suffered an injury at work, and the plaintiffs filed a motion to amend the Chapter 13 plan because the husband couldn’t work and would be receiving workers’ compensation benefits. The Chapter 13 plan was modified in March of 2010.
By June of 2010, the husband had returned to work for a new employer, but he suffered two additional injuries: an injury at his workplace, and a second injury while being transported in an ambulance. The husband filed another workers’ compensation claim. The plaintiffs made plans to file a personal injury lawsuit.
In June of 2012, the bankruptcy trustee filed a notice of completion of the Chapter 13 payment plan, and the plaintiffs were granted a bankruptcy discharge. The defendants in the personal injury claim argued that the plaintiffs couldn’t move forward with their case based on the judicial estoppel doctrine. Specifically, the defendants claimed that the plaintiffs were required to disclose the pending personal injury claim in the bankruptcy proceeding, and since they didn’t, they’re judicially estopped from moving forward. The trial court agreed, and the appellate court affirmed the trial court’s decision.
Judicial Estoppel and Personal Bankruptcy
What is judicial estoppel, exactly? In short, it’s a doctrine that requires debtors to list all personal assets (including pending causes of action) during a bankruptcy proceeding. The thinking is this: if a debtor has a pending personal injury claim and she’s filing for consumer bankruptcy, that personal injury case ultimately could be an asset that should be the property of the bankruptcy estate. If a court does determine that all the elements of judicial estoppel have been met, then a debtor is prevented from bringing (or continuing with) the personal injury cause of action.
Elements of judicial estoppel typically include the following:
·      The party (the debtor) knowingly took inconsistent positions in separate proceedings;
·      The party intended for both courts (in the separate proceedings) to accept the facts they presented; and
·      The party received a benefit from taking the two inconsistent positions.
To clarify a bit, taking two different positions typically refers to a scenario in which a party presents one set of facts in one proceeding, and presents another set of facts in a second proceeding that omits or includes different information from the set of facts presented in the first proceeding. In most judicial estoppel cases, this refers to a situation in which a party alleges to be providing information about all assets in a bankruptcy proceeding, while that party actually has a personal injury claim pending.
On first glance, it looks as though the plaintiffs’ behavior meets the elements of judicial estoppel. So what is the Illinois Supreme Court deciding upon? According to the appellate court, the Seymour case is “a classic situation to which the doctrine of judicial estoppel applies.” To be sure, the plaintiffs “knowingly took inconsistent positions in the bankruptcy court and the trial court regarding the existence of their personal injury claims,” and “they did so in a way that benefitted them in each of those courts.”
At the Supreme Court, it looks as though the plaintiffs argued that their non-disclosure was unintentional. We’ll have to wait for the decision to come down to see if there’s any wiggle room. In the meantime, if you have questions about filing for Chapter 7 or Chapter 13 bankruptcy, you should speak with an experienced Oak Park bankruptcy lawyer. As you can see, these cases can be extremely complicated, and it’s important to have a dedicated advocate on your side.
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