by NCBRC, NCLC, and NACBA Urged a Narrow, Equitable, Fact-Specific Inquiry
In a unanimous decision authored by Justice Jackson, the United States Supreme Court held that courts deciding whether a debtor’s failure to disclose a claim in bankruptcy was “inadvertent or mistaken”—for purposes of judicial estoppel—must look to the totality of the circumstances surrounding the omission. In Keathley v. Buddy Ayers Construction, Inc., No. 25–6 (June 11, 2026), the Court rejected the Fifth Circuit’s narrow rule, which had limited the inquiry to just two questions: whether the debtor knew the facts underlying the claim, and whether the debtor had a potential motive to conceal it. The Court vacated and remanded, holding the Fifth Circuit’s formulation was “simultaneously too rigid and too broad.”
The decision is a significant win for consumer debtors. NCBRC, joined by the National Consumer Law Center (NCLC) and the National Association of Consumer Bankruptcy Attorneys (NACBA) and the National Consumer Law Center (NCLC) filed an amicus brief in December 2025 urging the Court to decide the bad-faith question narrowly and to refrain from expanding debtors’ disclosure duties. The Court did exactly that, expressly declining to resolve the broader bad-faith dispute and presuming—without opining—on whether a continuing duty to disclose post-petition assets exists.
Facts
Thomas Keathley and his wife filed a Chapter 13 petition in the Eastern District of Arkansas in December 2019. In April 2020, the Bankruptcy Court confirmed an amended plan providing for interest-free repayment of 100% of creditors’ claims over five years.
In August 2021, while the bankruptcy remained open, Keathley was injured in a car accident in Mississippi involving a driver employed by Buddy Ayers Construction, Inc. He retained personal-injury counsel and told his bankruptcy attorney he intended to sue. Neither Keathley nor his bankruptcy counsel disclosed the potential claim to the Bankruptcy Court. Keathley filed his personal-injury action in the Northern District of Mississippi in December 2021, again without notifying the Bankruptcy Court.
In March 2023, Buddy Ayers Construction moved for summary judgment on judicial-estoppel grounds. Keathley immediately filed an amended schedule disclosing the claim, and submitted affidavits attesting that, after informing his bankruptcy counsel, he “believed [he] had done everything [he] needed to do,” and that he received no benefit from the nondisclosure. The District Court nonetheless applied Fifth Circuit precedent (Coastal Plains, Love, Long) and entered summary judgment, finding Keathley knew the underlying facts and had a hypothetical motive to conceal. The Fifth Circuit affirmed per curiam, with Judge Haynes concurring but expressing doubt that judicial estoppel’s goals were served given evidence of an “honest mistake.”
The Supreme Court’s Analysis
Justice Jackson’s opinion assumed without deciding both that judicial estoppel can apply in the bankruptcy context and that “inadvertence or mistake” can operate as an exception, citing New Hampshire v. Maine, 532 U.S. 742 (2001).
The Court explained that judicial estoppel is an equitable doctrine, and equity “eschews mechanical rules; it depends on flexibility.” Holmberg v. Armbrecht, 327 U.S. 392, 396 (1946). Equitable inquiries must proceed “on a case-by-case basis,” considering all relevant facts. Holland v. Florida, 560 U.S. 631, 649–650 (2010).
The Fifth Circuit’s rule was too rigid because it permitted courts to consider only two circumstances and barred consideration of any other evidence of inadvertence. It was simultaneously too broad because debtors almost always know the underlying facts of their claims and almost always stand to benefit hypothetically from nondisclosure—making the test a “one-size-fits-all” standard that treats nearly every omission as purposeful. As the Court observed, a “near-dispositive criterion is a poor fit for a fair inquiry into whether an omission is actually the result of inadvertence or mistake.”
Notably, the Court declined to reach the parties’ dispute over whether bad faith is required for judicial estoppel to apply, keeping its holding narrow—precisely the restrained approach NCBRC’s amicus brief had advocated.
Footnote 1 Says It All: The Supreme Court Cites NCBRC and Declines to Expand Debtors’ Disclosure Duties in Keathley
A Unanimous Win on the Merits—and a Reserved Question That Reflects NCBRC’s Advocacy
After describing the disclosure obligations the Bankruptcy Code imposes on debtors, the Court paused to flag what it was not deciding. In footnote 1, the Court wrote:
The parties here have proceeded on the understanding that the debtor has a continuing duty to disclose assets that arise after the initial filing of the bankruptcy petition (and therefore are part of the Chapter 13 estate). See Brief for Petitioner 5–6. We presume the same and do not opine on whether such a duty exists. See Brief for National Consumer Bankruptcy Rights Center et al. as Amici Curiae 6–12 (noting split on continuing duty to disclose). (Emphasis added.)
In other words, the Court expressly declined to hold that debtors carry a freestanding, continuing duty to disclose post-petition claims—and it cited NCBRC’s amicus brief, by name, for the proposition that there is a genuine split on that very question.
The Concurrences
Justice Thomas, joined by Justice Gorsuch, concurred in full but wrote separately to question the foundation of judicial estoppel altogether. He traced the doctrine’s late and “inhospitable” reception (first recognized in an 1857 Tennessee decision and still a minority view as late as 1980) and argued it appears to lack any basis in statute, the Federal Rules, or a founding-era equitable antecedent. He suggested the Court should reexamine the doctrine in a future case.
Justice Sotomayor concurred to emphasize why it may never make sense to apply judicial estoppel during an open bankruptcy. Applying the doctrine to dismiss a debtor’s tort suit “vaporizes assets” that could benefit creditors and hands a windfall to a tortfeasor who was never misled by the bankruptcy proceedings. She catalogued the far more equitable tools available to bankruptcy courts—sanctions under Rule 9011, plan modification under § 1329, conversion to Chapter 7, revocation of confirmation, and referral for perjury—and noted that judicial estoppel provides “one remedy and one remedy only: dismissal of the tort claim.” She also praised the Eleventh Circuit’s post-Slater totality-of-the-circumstances approach as a model.
Result
The Court vacated the Fifth Circuit’s judgment and remanded for an equitable, totality-of-the-circumstances analysis of whether Keathley’s omission was the result of inadvertence or mistake.
The opinion was issued June 11, 2026.
Opinion and Briefs
Keathley v. Buddy Ayers Construction, Inc. – Supreme Court Slip Opinion (Jackson, J.)
NCBRC/NCLC/NACBA Amici Brief in Support of Petitioner