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The Bankruptcy StrategistLJN NewslettersNewsSections

Unscheduled Rights of Action

By Jack L. Smith
August 29, 2012

A cornerstone of the bankruptcy system is the principle that property of the estate must be preserved and administered for the benefit of creditors, and that the debtor's fresh start entitles him to whatever he acquires later. This is in turn linked to another cornerstone ' the debtor's duty of full disclosure. As fundamental as these principles are, it is often long after the bankruptcy process is ostensibly completed that they are put to the test.

Despite the clarity of these concepts, debtors occasionally attempt to assert property rights that existed, at least in some form, at the time of their bankruptcy filing. When those rights were not fully disclosed in the debtor's schedules, there is a problem. This occurs most often in the context of Chapter 7 cases, when a debtor pursues a claim against another party after the bankruptcy case has been closed. It then triggers a series of questions about whose right of action is being asserted, who is entitled to assert it, and how the opposing party should respond.

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