We recently published a blog post which addressed whether it is a requirement to hire a lawyer to assist with a bankruptcy case. We said that, while there is no legal requirement to have an attorney assist with the proceedings, the bankruptcy process can involve issues that may be confusing to the average person. A recent Pennsylvania case is a good illustration.
The case involved a man who had developed asbestos-related illnesses and had joined a class action lawsuit along with others suffering from similar illnesses to recover money from their employers. The asbestos claims and the bankruptcy proceedings took place over almost two decades. The claim against the employer was first filed in 1996, with the claims being dismissed a year later with the possibility of opening the case again in the future.
In 2005, the man filed for Chapter 7 bankruptcy and his case was completed in 2006. In 2011, his asbestos claims were reinstated. The employer tried to have the claims dismissed, saying that he didn’t disclose the asbestos claim in his bankruptcy petition and he could no longer pursue the asbestos claim because his bankruptcy case has been closed without consideration of the claim. The employer claimed that the man he showed bad faith by not disclosing the claims.
While it is true that under the bankruptcy laws, pending legal claims should be disclosed, the court said that those do not have to include “every ‘hypothetical,’ ‘tenuous,’ or ‘fanciful’ claim” and the fact that the claims had been dismissed for eight years when the petition was filed did not meet the definition of bad faith. It did find, however, that the claims, whether active or not, should have been included in the list of assets listed in the petition.
Most bankruptcy cases won’t involve issues that span decades or include complicated claims like those in the complex asbestos suit. But even simpler issues could derail or create unwanted difficulties during the bankruptcy process. Something as simple as forgetting to list long-forgotten unpaid bills or a vehicle that is out of sight and out of mind because it is away at college with a child could, at the very least, delay the closure of a bankruptcy case, or even result in its dismissal. As stated in our previous blog, having the advice of bankruptcy attorney can be critical in avoiding these issues.