The Georgia Supreme Court recently issued a decision in a divorce case called Benton v. Benton that has bankruptcy implications. In this case, Mrs. Benton filed a Chapter 7 bankruptcy in the middle of her divorce case. In her petition she revealed her pending divorce action but did not reveal on Schedule B (the personal property schedule) of her petition her right to alimony or property settlement. For bankruptcy purposes, a right to receive money from any source is an asset.
After the bankruptcy case was closed, her husband asked the divorce court to deny his wife’s request for alimony and property settlement under the doctrine of judicial estoppal. He argued that because the wife failed to reveal the existence of property (her right to alimony and her claim of a property settlement), she should be “estopped” from receiving this property in the divorce case.
After the husband made this argument, the wife filed a Motion to reopen her bankruptcy case to add these assets as property. The Bankruptcy Judge approved the Motion.
The Supreme Court held that judicial estoppal was not appropriate because the wife had amended her bankruptcy to add the asset.
What should you take from this case? First, you and your lawyer should think very carefully about what constitutes an “asset” for bankruptcy purposes. Any claim you have to receive money is technically an asset.
Secondly, if you realize that you left something out, file an amendment to fix the problem. Estoppel does not just apply in divorce cases. I have seen it applied in car accident and medical malpractice cases as well. If, for example you have been in a car accident but your case has not settled, your potential settlement is an asset of your bankruptcy estate and your failure to list that claim could result in a defense verdict.
Thanks very much to Atlanta attorney Scott Riddle for featuring this case on his excellent blog called the Georgia Bankruptcy Blog. Scott’s blog reviews recent cases and developments in Georgia and the 11th Circuit. It is well worth your time. Scott is a bankruptcy litigator and has extensive experience in Chapter 11 business bankruptcy cases.