Legal Malpractice

How Often is Bankruptcy an After Effect of Legal Malpractice?

By (Andrew Lavoott Bluestone)

There are a large number of cases in which plaintiff loses the capacity to sue a prior attorney in legal malpractice because in the interim, plaintiff has filed for bankruptcy.  Any claim, even inchoate, that a petitioner in bankruptcy has at the time of filing a Chapter 7, becomes part of the bankrupt's estate and hence may be administered by the Trustee.  The trustee must take every claim  including one not yet in suit for potential pre-petition bankruptcy, as a potential asset of the estate and try to turn it into money.  In Strujan v Tepperman & Tepperman, LLC. ; 2011 NY Slip Op 30211(U); January 28, 2011; Sup Ct, New York County ;Docket Number: 401164/2010 ;Judge: Jane S. Solomon we see one such typical outcome.

"Tepperman moves f o r summary judgment on the ground that filed for bankruptcy, Strujan lacked the capacity to commence a lawsuit in her individual capacity, so that her malpractice claim must be dismissed because she cannot establish that she would have prevailed in the underlying action.  The commencement of a bankruptcy case creates a  bankruptcy estate, which gains control over the property of the  debtor. When Strujan filed for bankruptcy in 2005, the claim
arising from her 2003 injury became the property of her estate.  "[The failure to schedule a legal claim as an asset in a  bankruptcy proceeding deprives the debtor of standing to raise it
in a subsequent legal action" (Barranco v. Cabrini Medical Center , 50 AD3d 281 (1st Dept, 2008)

Upon her discharge, the claim does not revert to Struhan, because "[i]f a claim owned by
a bankrupt is of value, his creditors are entitled to it, and he cannot, by withholding knowledge of its existence from the trustee, obtain a release from his debts and still assert title to--and collect upon--the claim for his own benefit'' (Ortiz v.New York Medical Group PC , 55 AD3d 509 [l" Dept., 2008.  Accordingly, Strujan could not have brought the personal injury lawsuit in her individual capacity. '

Full post as published by New York Attorney Malpractice Blog on February 07, 2011 (boomark / email).