Ms. Jones brought suit against the College of Southern Maryland under the Family and Medical Leave Act and subsequently filed a Chapter 7 bankruptcy petition, eventually listing the lawsuit as an asset in her schedules. The Trustee then settled the lawsuit with the College of Southern Maryland for $75,000, with $25,000 to the attorney, as she was the only party having standing to pursue the claim. Ms. Jones objected to this settlement.
The Court of Appeal affirmed that the Trustee was the sole party with standing to prosecute and settle the claim.
This would not be an issue in North Carolina, unlike Maryland, where personal injury claims, even for non-bodily injuries, also unlike the federal exemption, such as the FMLA, would be fully exempt.
The Chapter 7 Trustee also settled a malpractice claim against Ms. Jones’ original bankruptcy attorney for failing to advise Ms. Jones that the filing of her Chapter 7 would likely cost her control of her FMLA claim.
As the only claims filed in Ms. Jones’ case are $137,155.34 in student loans and $2,523.00 in priority taxes (there were only $7,286.18 in other scheduled claims), most of the assets in this case, other than the Trustee commission, will go to her non-dischargeable debts. This again begs the question of why Ms. Jones filed a Chapter 7 (paying her attorney $1,495) in the first place.
It is not clear why this case was not immediately converted to a Chapter 13, since even if the proceeds may ultimately been used to pay creditors, Ms. Jones would have retained control of the lawsuit and been able to fight for a greater amount.
For a copy of the opinion, please see: