Client Claims Attorney Negligent For Advising She File For Bankruptcy Relief - Case Dismissed As Client Lacks Legal Capacity
On May 29, 2019, an appellate court agreed that a client's claim for legal malpractice is no longer the property of the client once they file for bankruptcy protection under Chapter 7 of the US Bankruptcy Code. In March 2012 the plaintiff/client filed for bankruptcy and 3 years later sued the attorney's who she claimed improvidently advised to do so. The lower court dismissed the case based on well settled law that holds once someone files "a voluntary bankruptcy petition, all property which a debtor owns, including a cause of action, vests in the bankruptcy estate."
Any claim for legal malpractice arising out of the bankruptcy filing accrued on the date the petition for bankruptcy protection was filed. As such, the client no longer had the right to sue her attorney's - that right belonged only to the Trustee of the bankrupt estate. As such the appellate court agreed that the legal malpractice suit filed by the bankrupt client was dismissed on the ground that she lacked the legal capacity to make such a claim. Burbacki v Abrams, Fensterman 2019 WL 2275309