Med mal action is part of bankruptcy estate

Listen to this article

Where the bankruptcy plaintiff did not disclose that she had a medical malpractice claim and did not seek to exempt it from the bankruptcy estate, plaintiff lacks standing to pursue the claim. “[T]he cause of action remain[s] a part of the bankruptcy estate and [is] enforceable solely by the trustee.”

Defendant’s motion to dismiss is granted.

Overview

Plaintiff sued defendant for medical malpractice and failed to report she had filed for voluntary bankruptcy in response to defendant’s interrogatories.

“[W]hen Plaintiff supplemented her interrogatory answers on April 14, 2022, she still did not state that she had filed for bankruptcy protection, although she had filed for Chapter 7 bankruptcy on March 24, 2022 in the United States Bankruptcy Court for the Eastern District of Virginia. Plaintiff did not disclose the instant claim in response to Question 33 of the Voluntary Petition when she filed on March 24, 2022.

“On the morning of trial, June 6, 2022, Defendant Northern Virginia Eye Surgery Center moved to dismiss the case for lack of standing and judicial estoppel because of Plaintiff’s bankruptcy filing (which it discovered the day before).

“Another judge of this court deferred ruling on the motion to dismiss to allow Plaintiff’s counsel to investigate and stayed the case pending briefing and argument on the motion to dismiss. On June 8, 2022, Plaintiff amended her bankruptcy filing by disclosing the instant claim in response to Question 33.”

Analysis

“Defendant Eye Consultants asserts that, after March 24, 2022, Plaintiff no longer had standing to pursue this case, relying on Kocher v. Campbell, 282 Va. 113 (2011). Defendant Eye Consultants asserts that, after March 24, 2022, Plaintiff no longer had standing to pursue this case, relying on Kocher v. Campbell, 282 Va. 113 (2011). Kocher resolves the instant matter. …

“Kocher … explain[ed] that there are two methods by which assets of a bankruptcy estate may be restored to a debtor after a petition in bankruptcy has been filed.’ …

“The first method allows the trustee to abandon the assets. As in Kocher, the trustee here did not abandon the instant claim as he was not even aware of it as of June 6, 2022 because Plaintiff did not disclose the instant claim in response to Question 33 of the Voluntary Petition. …

“The second method ‘allows the bankruptcy court to exempt the assets pursuant to 11 U.S.C. § 522. In the absence of abandonment or exemption, the assets remain a part of the bankruptcy estate.’ …

“The federal bankruptcy law: ‘provides for certain exemptions, but permits the states to “opt out”

of those provisions by substituting their own exemption laws. …

“‘Virginia is a state that has done so. … Code § 34-28.1 provides that causes of action for personal injury “shall be exempt from creditor process against the injured person[.]’” … That exemption is therefore applicable in bankruptcy proceedings.’ …

“But the ‘opt out’ is conditional: ‘[T]he debtor must list the cause of action as an asset in his schedule B and then claim it as exempt property on his schedule C using forms prescribed by the bankruptcy rules. The bankruptcy court may thereafter enter an order exempting the listed property.

“‘Until such an order is entered, the property remains a part of the bankruptcy estate. … If the debtor fails to follow this procedure, the cause of action, having become a part of the bankruptcy estate by virtue of 11 U.S.C. 541, remains so, and is enforceable solely by the trustee.’”

Conclusion

“In the case at bar, Plaintiff did not list the cause of action as an asset in her schedule B and then claim it as exempt property on her schedule C prior to June 6, 2022. Accordingly, the bankruptcy court did not enter an order exempting the cause of action prior to June 6, 2022, so that, as of June 6, 2022, the cause of action remained a part of the bankruptcy estate and was enforceable solely by the trustee.’

“That being the case, as of March 24, 2022, Plaintiff did not have standing to pursue the cause of action.”

The motion to dismiss is granted. The case is dismissed with prejudice.

Shaw-McDonald v. Eye Consultants of Northern Virginia, Record No. CL 2019-11982, Oct. 17, 2022. Fairfax County Circuit Court (Gardiner). Sarah E. Godfrey, Michelle L. Warden, Benjamin J. Trichilo for the parties. VLW 022-8-069, 5 pp.