4th Circuit: Jones v. College of Southern Maryland- Only Chapter 7 Trustee Has Standing in Non-exempt Personal Injury Case

Summary:

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.

Commentary:

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:

Jones v. College of Southern Maryland- Only Chapter 7 Trustee Has Standing in Non-exempt Personal Injury Case

About

1. Bachelor of Arts degree in English Literature from Washington University, 1993. 2. Juris Doctor degree from George Washington University, 1996. Admissions to Practice of Law: North Carolina Bar, 1996. Federal District Courts for the Eastern and Middle Districts of North Carolina. Specialty Certification: North Carolina State Bar: Certified as a Specialist in Consumer Bankruptcy. Areas of Practice: Practice limited to consumer and business debtor bankruptcy law, 1998 to present. Memberships: National Association of Consumer Bankruptcy Attorneys (NACBA). North Carolina Academy of Trial Lawyers (NCATL). North Carolina Bar Association, Bankruptcy Section. Lectures prepared and presented: North Carolina Academy of Trial Lawyers seminar on bankruptcy; Topic: Counseling the Consumer Debtor Prior to Court - C.Y.A. Forms to Help 'Gird They Loins'; 2001. Middle District Bankruptcy Seminar; Topic: Preparing Chapter 13 Plans; 2002. NACBA National Convention; Topic: Efficient Office Practices; 2003. NACBA National Convention; Topic: Chapter 7 vs. Chapter 13 Debates; 2004. Middle District Bankruptcy Seminar; Topic: Chapter 7 & 13 Hot Issues; 2004. Positions held: NACBA National Convention; Convention Chair; 2008. NACBA National Convention; Panel Moderator: Topic: Basic Bankruptcy Issues; 2008. NACBA National Convention; Panel Moderator; Topic: Chapter 13-Disposable Income and Other Issues; 2007. NACBA National Convention; Panel Moderator; Topic: Representing Members of the Military and Their Families; 2007. NACBA, Member of National Board of Directors, 2006 to present. NCATL, Chair of the Bankruptcy Section, 2003 to 2007. NACBA, Chair of the North Carolina Section, 2003 to 2007. NC Bar Association, Bankruptcy Section, Bankruptcy Council Member, 2004 to present.

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