Debtor Lacks Standing to Bring Adversary Complaint Based on Pre-Petition Claims

Posted by NCBRC - March 23, 2015

The debtor’s pre-petition TILA claims were part of his chapter 7 bankruptcy estate and, therefore, only the trustee had standing to bring those claims while the bankruptcy was pending. Bernstein v. Wells Fargo (In re Bernstein), No. 14-65054, Adv. Proc. 14-5306 (Bankr. N.D. Ga. Jan. 2, 2015).

In the Statement of Financial Affairs filed with his bankruptcy petition, Mr. Bernstein listed pending state and federal court cases against Wells Fargo based on alleged violations of the Truth in Lending Act. He followed with an adversary complaint based on the same conduct. While the adversary proceeding was pending, the debtor obtained his discharge. Wells Fargo moved to dismiss the adversary proceeding arguing, in part, that the debtor lacked standing. The court agreed.

The court noted that the conduct giving rise to the claims took place prior to the debtor’s bankruptcy filing. The debtor did not exempt the claims nor did the trustee abandon them. Therefore they became part of the bankruptcy estate. Citing Parker v. Wendy’s Int’l, Inc., 365 F.3d 1268, 1272 (11th Cir. 2004), the court found that only the trustee has standing to bring claims belonging to the estate.

Wells Fargo argued further that even upon closure of the debtor’s chapter 7 case, the TILA claims remained part of the bankruptcy estate under section 554(d) because they were not properly scheduled under section 521(a)(1). The court disagreed finding that section 521’s requirement of proper filing was satisfied by listing the causes of action in the Statement of Financial Affairs. Therefore, once the bankruptcy case was closed, the property re-vested in the debtor in accordance with section 554(c).

The court thus granted the motion to dismiss because while in bankruptcy the debtor had no standing to pursue the claims and post-discharge the court no longer had subject matter jurisdiction over the adversary proceeding. The court noted, however, that the debtor was free to pursue his claims outside of bankruptcy.

Bernstein Bankr. ND Ga opinion

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