(7th Cir. Mar. 23, 2015)
The seventh circuit reverses the district court’s order limiting the trustee’s recovery on the debtor’s tort claim to the value of creditor claims not already paid through the bankruptcy. The debtor had scheduled a workers’ compensation claim when he filed the chapter 7 petition, but after receiving the discharge he brought claims for the same injury and sought significant damages. The tort defendants moved for summary judgment, arguing that the debtor was estopped from asserting the claims because he failed to schedule them in the bankruptcy, and the court appropriately granted that motion. The debtor then moved to reopen the bankruptcy so that the trustee could pursue the claims. The district court allowed the substitution but entered an order limiting the damages sought to the value of the amount of the creditor claims not paid in the bankruptcy (because the debtor should not be permitted to benefit when he omitted the claim from his schedules). The claims were not worth pursuing after the reduction and thus the trustee appealed. The seventh circuit holds that the claim should not be reduced so that creditors are harmed. Instead, the district court should determine whether the debtor’s omission was intentional such that he should be barred from sharing in any recovery on the claim. Opinion below.
Author: Matt Lindblom