June 2012

Judicial Estoppel as Applied to Unscheduled Litigation Claims

American Bankruptcy Institute Journal
Lynne B. Xerras
In any given bankruptcy case, statutory requirements are imposed on a debtor by virtue of the U.S. Bankruptcy Code and Federal Rules of Bankruptcy Procedure, as well as by local practice. Among a debtor’s foremost duties is that of § 521(1) of the Bankruptcy Code to “file a...schedule of assets and liabilities,” including one—Official Form Schedule 6B—that requires a debtor to list all "contingent and unliquidated claims of every nature...counterclaims of the debtor, and rights to setoff" as personal property assets. The duty of disclosure is undeniably a continuing one. Most practitioners are aware that a consequence of inadequate disclosure or other lack of truthfulness in a debtor’s bankruptcy filings can result in denial of a discharge. When a debtor is a plaintiff in pre-petition litigation or asserts a claim against a third party arising from pre-petition conduct, yet fails to schedule the cause of action, the doctrine of judicial estoppel may result in the dismissal of the debtor’s litigation as another repercussion of failure to abide by unequivocal statutory duties.

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