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Idaho Supreme Court rules on bankruptcy case

A debtor could not reopen his Chapter 13 case in order to avoid having his medical malpractice lawsuit dismissed for failing to include it as an asset of his bankruptcy estate, the Idaho Supreme Court has ruled in affirming judgment.

Jerry Doherty, a southeastern Idaho resident, sought treatment from Gordon E. Dixon, a doctor at the Blackfoot Medical Clinic, for an eye injury. After losing sight in the injured eye, Doherty sued for malpractice, alleging that Dixon was negligent for failing to refer him to an eye specialist.

At the time that Doherty filed his medical malpractice suit, he was in the midst of Chapter 13 bankruptcy. Doherty subsequently received a discharge of debts and his bankruptcy case was closed.

Dixon contended that Doherty was judicially estopped from proceeding with his medical malpractice case because he had failed to list the lawsuit as an asset of his bankruptcy estate.

To avoid dismissal, Doherty attempted to reopen his bankruptcy case in order to file an amended schedule of assets that included the medical malpractice claim.

But the state Supreme Court held that Doherty could not avoid the application of judicial estoppel by reopening his bankruptcy case.

“Permitting the reopening cure as a defense to judicial estoppel provides an incentive for debtors to conceal potential causes of action until the opposing party identifies the concealment and objects, but no incentive to disclose all assets: If the cause of action is disclosed and goes unnoticed, then the debtor can recover free from the claims of his discharged creditors. But if the non-disclosure is noticed, the debtor simply needs to reopen and amend his schedule.…

“Indeed, [the plaintiff’s] concealment of this cause of action from the bankruptcy court nearly went unnoticed. [The defendant] only discovered [the plaintiff’s] bankruptcy filing less than two months before the jury trial was set to begin,” the court said.

 

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