A lady had an auto accident after she filed for chapter 13, and hired a law firm and brought a lawsuit against the other party. Her personal injury lawyers applied for and receive permission from the Bankruptcy Court to represent her, but she did not amend her bankruptcy schedules to explicitly disclose the claim, or claim it as exempt.

After the case was about to settle, she applied for permission to amend her schedules to claim the $16,000 as exempt. The chapter 13 trustee objected, and wanted all the money given to him to give to the creditors, arguing that since the debtor did not list and claim the accident proceeds as exempt, she should be estopped.

in Bankruptcy Court in Houston, Texas, U.S. Bankruptcy Judge Marvin Isgur ruled that the lady could claim most of the money as exempt. Part of the money was ordered turned over to the trustee, the part that could not be claimed as exempt.

Judge Isgur found that there was no duty in the Bankruptcy Code for a debtor to report "post-petition" property, property such as an auto accident claim that is acquired during a bankruptcy case. He went on to find that even if there is such a duty, the debtor fulfilled it because her lawyers had properly filed papers with the court to get permission to be employed as special counsel, and later to get permission to settle the case, so creditors and other parties in the case had knowledge that she had an auto accident claim.

The chapter 13 trustee received the rest of the money from the auto accident, $5433.80, and this extra money was permitted to be paid to unsecured creditors. So the debtor's creditors get more of their claims paid back. In re Bratcher, Bankr. S.D. TX 2013.

J Thomas Black
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Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization
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