RICHMOND, Va. (Legal Newsline) – Rulings by a circuit court were correct in requiring
that a Virginia woman should have disclosed a pending lawsuit in a bankruptcy
estate, Virginia's high court has ruled.
Virginia Supreme Court Justice William C. Mims wrote the court's Feb. 16 opinion in Sheryl Denise Ricketts v. Charlie Edward Strange et al.
Mims wrote that Ricketts did
not properly exempt her negligence claim from the bankruptcy estate. She
therefore lacked standing to pursue it, and the circuit court properly granted
Strange’s motion for summary judgment. Also, the circuit court did
not err by denying her motions for leave to amend her complaint.
Rickets filed a complaint in
the Circuit Court for the City of Danville on Jan. 16, 2014, just before the statute of limitations was
to expire. She alleged that Strange’s negligence caused a car accident.
Strange asked for summary judgment,
saying Ricketts had filed a chapter 7 bankruptcy petition in September 2012.
This motion alleged Ricketts failed to properly exempt the lawsuit from the bankruptcy estate.
The circuit court had granted the summary judgment,
determining that Ricketts failed to disclose her claim against Strange and that
it was part of the bankruptcy estate.
Ricketts was required to list assets and “other contingent
and unliquidated claims of every nature." But she marked “none.”
Ricketts had argued the she could pursue suing Strange, whom
she alleged caused a traffic accident in February 2012 that injured her back, because
she had properly exempted it from the bankruptcy estate.
Mims said the court had “competing principles” to consider.
A debtor’s claim of exemption should not be so narrow as to defeat an otherwise
proper exemption. However, the opinion continues, the operation of the
bankruptcy system depends on honest reporting.
While Ricketts didn’t have to go as far as to list every
single item in her household, she could have been a little more forthcoming,
the opinion stated.
The opinion cited a 2005 case and the simple mention of “Auto Accident Claim” would have been sufficient sufficient to alert
the trustee to a potential personal injury claim.
“Ricketts’ overtly general
and misplaced exemption language did not exempt her cause of action from the
bankruptcy estate,” Mims wrote. “While there are no ‘bright-line rules’ a
debtor must follow to exempt a cause of action, the schedules must contain
sufficient detail to lead the trustee to the claim ultimately asserted.
Ricketts’ schedules do not.”