Patricia Plaintiff is involved in an auto accident. She is thinking about suing the other driver for damages. She is also planning to file for bankruptcy. Worried that the money she would be entitled to from the accident would be seized by the bankruptcy trustee, she delays filing her lawsuit in the hopes that her bankruptcy attorney (and everyone else involved in the administration of her bankruptcy case) does not learn about the asset.
- She wrongly assumed that the trustee would have a claim to the money. Federal exemptions currently protect more than $20,000 for a personal injury claim, plus any wildcard exemption that the debtor has remaining. Wisconsin exemptions can protect the first $50,000 of a personal injury claim.
- Because she omitted her contingent asset, she will most likely not be allowed to claim her exemptions later, if and when the asset is discovered. The exemption she would otherwise have been entitled to can be denied for failure to disclose the asset initially.
- Because she did not list the asset on her bankruptcy schedules. she could be barred from filing the lawsuit later due to judicial estoppel, which precludes a party from taking a position in a legal proceeding (the personal injury lawsuit) that is inconsistent with a position the party took in a prior legal proceeding (the bankruptcy case). In other words, by omitting her personal injury claim, she basically testified to the bankruptcy court that she has no personal injury claim. She cannot then, later, go into civil court and assert that she has a personal injury claim.