Multiple Trips to Bankruptcy Court Pay Off, As Sanchez Obtains a Dismissal of Plaintiff’s State Court Personal Injury Action, Resulting From Plaintiff’s Failure to Report Claims to Bankruptcy Court

As part of his motion to dismiss Plaintiff’s personal injury state court action, Clausen Miller partner Yesy Sanchez appeared at the Eastern District Bankruptcy Court in Central Islip, New York, and successfully opposed two motions filed by Plaintiff seeking to reopen her bankruptcy case. Plaintiff previously failed to disclose her bodily injury claims against the insured during her bankruptcy proceedings and subsequently commenced an action against them. Yesy uncovered this information during Plaintiff’s deposition.

Upon learning of Plaintiff’s failure to comply with her statutory duty to disclose her assets to the bankruptcy court, we filed a motion to dismiss on the grounds that Plaintiff lacked standing to sue. Claims that are not disclosed, administered, or abandoned by the bankruptcy court cannot be pursued by Plaintiff thereafter.

Plaintiff opposed our motion to dismiss in state court and filed two motions in bankruptcy court seeking to reopen her case. Plaintiff’s first motion asked the bankruptcy court to reopen her case for the sole purpose of abandoning her bodily injury claims against the insured. Plaintiff’s second motion offered to pay her creditors but only if the court agreed to certain conditions, which included permitting Plaintiff to report the claims and having the court immediately abandon the claims back to Plaintiff. Had the bankruptcy court granted either of Plaintiff’s motions, it would have destroyed the basis of the insured’s pending motion to dismiss and permitted Plaintiff to pursue her bodily injury claims.

In both instances, the bankruptcy court determined that Plaintiff’s conduct was willful and that it would not reopen her case as it would interfere with the state court action, including the insured’s pending motion to dismiss. The state court also agreed that Plaintiff’s failure to disclose was willful, and the state court was fully aware of the bankruptcy court’s refusal to reopen her bankruptcy case.

This case highlights Clause Miller attorneys’ willingness to go outside traditional venues to defend a bodily injury claim. For more information, contact Yesy at [email protected].