Bankruptcy Court holds a personal injury claim is not “abandoned” if disclosed on the bottom of Schedule I (possible increase of income) but not on Schedule B.

Bankruptcy Court holds a personal injury claim is not “abandoned” if disclosed on the bottom of Schedule I (possible increase of income) but not on Schedule B.

The Debtor was injured in a traffic accident in 2012. Later that year he filed a chapter 7 bankruptcy. He didn’t list the personal injury as an asset on Schedule B. Instead he listed it on Schedule I in response to the request to “Describe any increase or decrease in income reasonably anticipated to occur within the year following the filing of this document:”

“Debtor was hit by a car from behind and pinned between two cars in early 2012. He had to have surgery on his arm from the fall he took after the car backed up an [sic] he hit the ground. His forearm muscle has ripped in two right in the center so the operation to repair any damage was futile. Debtor is not working right now, but [sic] Debtor is able to, he intends to apply for employment.”

The Debtor also disclosed in response to question #2 of the Statement of Financial Affairs that he received $6,291.23 from “2012: Public service mutual insurance worker’s Compensation.”

The Debtor filed a personal injury lawsuit in state court. Two weeks later the chapter 7 trustee filed a report of no distribution and the Debtor received a discharge.

In 2014 the Debtor settled the personal injury lawsuit for $1,600,000.00 and received as his share $839,289.59. The Debtor purchased a Bentley automobile and a house. Pertinent for this case he also opened up several vape shops with a partner Nicholas Donald Brainard (“Brainard”). The partnership eventually dissolved and Debtor signed a promissory note to Brainard. The Debtor fell behind in his payments.

Brainard then filed a chapter 7 case. Brainard’s Trustee sued Debtor to recover on the promissory note and obtained a judgment in the amount of $91,465.25.

Debtor then refiled another chapter 7, which was converted to a chapter 13. The Debtor claimed that the Bentley, his house and his ownership in the vape shops were exempt as proceeds from his personal injury. Brainard’s trustee objected.

The Bankruptcy Court framed the issue as whether the trustee in the 2012 bankruptcy abandoned the personal injury claim to the Debtor, giving the Debtor standing to sue or settle. The Court stated abandonment can happen in two ways. The trustee can affirmatively abandon property of the estate under 11 U.S.C. § 554(a). Alternately, the property can be “deemed” abandoned under 11 U.S.C. § 554(c).


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