Opinion ID: 798283
Heading Depth: 1
Heading Rank: 2

Heading: The Guays' Failure to Disclose the Existence of Their Claims to the Bankruptcy Court

Text: Throughout their bankruptcy proceeding, the Guays failed to file amended asset schedules identifying their lawsuits as assets, as required by 11 U.S.C. § 521(a)(1) and § 541(a)(1) & (7). During an August 12, 2009 meeting of the Guays' creditors, an attorney for the State of New Hampshire asked the Guays about various civil lawsuits in which they were plaintiffs, including those at issue here. The lawsuits were discussed among the Guays, their counsel, counsel for the State, and the bankruptcy Trustee, and the Guays' counsel offered to provide the Trustee with copies of all the relevant filings. It is unclear whether these documents were ever provided, but the Guays never formally disclosed the existence of the claims by amending their asset schedules. Later in August 2009, the State of New Hampshire filed a motion seeking an order requiring the Guays to demonstrate why they should not be held in contempt for failing to file required monthly operating statements and amended bankruptcy schedules. The motion noted that these filings were required both by Federal Rule of Bankruptcy Procedure 1019 and by the bankruptcy court's order converting the bankruptcy matter from a Chapter 11 to a Chapter 7 proceeding. In response to this motion, the bankruptcy court ordered the Guays to file the additional information required by Bankruptcy Rules 1019 and 1007, including information concerning any property interest acquired subsequent to the filing of the bankruptcy petition. The order required the Guays to file this information by October 29, 2009. Before that deadline arrived, the bankruptcy court granted the Guays a discharge on October 27 pursuant to 11 U.S.C. § 727. This order discharged all debts eligible for discharge in a Chapter 7 bankruptcy, but did not dismiss the case or end the Trustee's responsibility for the estate. Accordingly, in response to the court's earlier order, the Guays filed an affidavit with the bankruptcy court on October 29 stating that no amendments to their petition or asset schedules were necessary. Several days later, the State of New Hampshire filed another motion in the bankruptcy proceeding seeking an order finding the Guays in contempt for failing to file monthly operating reports and the disclosures required by Bankruptcy Rule 1019. The Guays filed an opposition to this motion, stating that the Debtors have filed an affidavit stating that the information provided in their bankruptcy schedules as amended was accurate and there are no changes, and again affirming the completeness and accuracy of their bankruptcy schedules and failing to identify their lawsuits as assets. Shortly thereafter, in a December 2009 order, the magistrate judge handling this civil action ordered the parties to submit additional briefing on the issue of whether the bankruptcy Trustee, and not the Guays, was the real party in interest in this lawsuit. In doing so, the court noted that the Trustee had not abandoned the action. In their supplemental brief, the defendants raised the issue of judicial estoppel for the first time. Subsequently, on January 15, 2010, the Guays filed with the bankruptcy court a Report of Unpaid Chapter 11 Obligations in which they identified their claims in this lawsuit. [3] The Chapter 7 Trustee then filed a Notice of Abandonment with respect to the Guays' lawsuits, explaining that she had determined that the Lawsuits are burdensome and of inconsequential value to the estate. This Notice was served on the Guays' creditors, who were given the opportunity to object to the Trustee's action if they believed the lawsuits had significant value. None objected.