Can bankruptcy trustee take proceeds of lawsuit settlement 8 years after filing chapter 7 if both lawsuit and bankruptcy were filed around the same time?

Answer 1

The Lawsuit was required to be listed as an asset. If it was listed, and then abandoned by the Trustee, then it is yours to pursue.

If it was not listed, then it belongs to the BK estate managed by the Trustee, until the BK case is reopened and the Trustee determines whether or not it is an asset and how to manage it.. regardless of how many years have passed (because the lawsuit does not belong to you anymore, unless the Trustee makes that written statement that it has been abandoned).

Once a bankruptcy petition is filed and a trustee appointed, " 'the right to pursue causes of action formerly belonging to the debtor , vests in the trustee for the benefit of the estate.' " (Bauer v. Commerce Union Bank, 859 F.2d 438, 441 (6th Cir. 1988)(quoting Jefferson v. Mississippi Gulf Coast YMCA, 73 B.R. 179, 181-182 (S.D.Miss.1986)). )

Accordingly, a bankruptcy petitioner loses standing for causes of action and the estate becomes the real party in interest unless the bankruptcy trustee abandons the claims. (See In re Lopez, 283 B.R. 22, 28-29 (9th Cir. 2002); In re Pace, 146 B.R. 562, 565-66 (9th Cir. 1992).)

Because the trustee controls the estate, the trustee is the real party in interest with standing to sue under any cause of action that belonged to the debtor when the petition was filed. It follows that "the decision whether to pursue a claim or not is vested within the trustee's discretion." (Detrick v. Panalpina, Inc., 108 F.3d 529, 535 (4th Cir. 1997).)