In re Easley-Brooks
2013 Bankr. LEXIS 692
Bankr. S.D.N.Y.2013Background
- Brooks filed a chapter 13 petition in 2008 and was discharged in 2009; case later converted to chapter 7 on July 29, 2009.
- The schedules in the chapter 7 case did not disclose any medical malpractice claims.
- Brooks filed a New York medical malpractice action on June 11, 2011, which was dismissed for lack of capacity to sue; state court held the bankruptcy estate owned the claim due to non-disclosure.
- Brooks argues the malpractice claim was inadvertent and not part of the chapter 7 estate because conversion was not in bad faith.
- Chefitz argues reopening would prejudice defendants and provide little creditor benefit; favors the defense.
- The court granted Brooks’s motion to reopen, holding the medical malpractice claim is property of the chapter 7 estate and may be administered by the trustee.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the case should be reopened to administer an undisclosed asset | Brooks seeks reopening to add the undisclosed claim for creditors’ benefit. | Chefitz contends reopening would prejudice defendants and lack creditor benefit. | Reopening granted to administer the undisclosed asset. |
| Whether the medical malpractice claim is property of the chapter 7 estate | The claim became property of the estate upon bad-faith conversion. | If conversion was not in bad faith, the claim would not be estate property. | Yes; the claim is property of the chapter 7 estate because conversion was in bad faith. |
| Whether the conversion from chapter 13 to chapter 7 was in bad faith | The debtor concealed the claim and filed after discharge to preserve recovery. | Bad faith is not conclusively established; disclosure issues are not fatal to reopening. | Conversion was in bad faith; supports treating the malpractice claim as estate property. |
Key Cases Cited
- In re Arana, 456 B.R. 161 (Bankr. E.D.N.Y. 2011) (reopening assets and creditor benefit outweighs prejudice)
- In re Upshur, 317 B.R. 450 (Bankr. E.D. Va. 2004) (benefit to creditors outweighs prejudice in undisclosed assets)
- In re Lowery, 398 B.R. 512 (Bankr. E.D.N.Y. 2008) (detailed considerations of creditor benefit vs. delay and prejudice)
- In re Otto, 311 B.R. 43 (Bankr. E.D. Pa. 2004) (discretionary standard for reopening cases)