The Eighth Circuit slammed the door on the argument that a chapter 13 debtor can avoid the doctrine of judicial estoppel by contending there is no obligation to disclose a cause of action arising after filing.
The Jan. 26 opinion by Circuit Judge Diana E. Murphy rejected several arguments made on behalf of the debtor by the National Association of Consumer Bankruptcy Attorneys, or NACBA.
A man confirmed his chapter 13 plan in early 2010. More than two years later, he quit his job and later filed employment discrimination charges against his former employer. He got permission from the Equal Employment Opportunity Commission and filed suit in 2013. His debts were discharged in July 2014.
The district court dismissed the discrimination suit using the doctrine of judicial estoppel. The debtor countered by reopening his chapter 13 case, amending his schedules to list the suit, and asking the district court to amend its prior order by denying summary judgment in the employer’s favor. The district court, not persuaded by the debtor’s “last minute candor,” denied the motion. An unsuccessful appeal followed.
NACBA argued in the circuit court that chapter 13 debtors have no obligation to disclose causes of action arising after filing bankruptcy. Judge Murphy rejected this contention, saying her circuit previously held that a debtor who does not amend schedules takes inconsistent positions. The debtor’s plan also required disclosure of any later-arising claims or causes of action.
Courts have allowed debtors with pending bankruptcies to proceed with belatedly disclosed lawsuits so long as creditors alone benefit from any recovery. Judge Murphy’s opinion does not deal with that possibility, presumably because there was no recovery from the lawsuit while the plan was still alive, thus leaving no possibility for additional payments to creditors. Consequently, the result might have been different were the chapter 13 case still pending.