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PLAINTIFF SUED DEFENDANT ATTORNEYS ALLEGING INACCURATE ADVICE CAUSED HER TO FILE FOR BANKRUPTCY, BECAUSE THE LEGAL MALPRACTICE ACTION ACCRUED WHEN PLAINTIFF FILED FOR BANKRUPTCY, THE LAWSUIT BECAME PART OF THE BANKRUPTCY ESTATE AND PLAINTIFF WAS THEREBY STRIPPED OF THE CAPACITY TO SUE (SECOND DEPT).

The Second Department determined plaintiff did not have the capacity to sue the defendant attorneys for legal malpractice. The lawsuit alleged the attorneys gave inaccurate advice which caused plaintiff to file for bankruptcy on March 20, 2012. Because plaintiff’s legal malpractice action accrued on the day she filed for bankruptcy, and the lawsuit was not listed as an asset, the lawsuit became part of the bankruptcy estate:

The commencement of a bankruptcy proceeding creates an “estate” that is comprised of “all legal or equitable interests of the debtor in property as of the commencement of the case” (11 USC § 541[a][1]…). “Upon the filing of a voluntary bankruptcy petition, all property which a debtor owns, including a cause of action, vests in the bankruptcy estate” … . “Although federal law determines when a debtor’s interest in property is property of the bankruptcy estate, property interests are created and defined by state law”… . Causes of action that accrue under state law prior to the filing of a bankruptcy petition, as well as those that accrue as a result of the filing, are property of the estate … . “[A] debtor’s failure to list a legal claim as an asset in his or her bankruptcy proceeding causes the claim to remain the property of the bankruptcy estate and precludes the debtor from pursuing the claim on his or her own behalf” … . Burbacki v Abrams, Fensterman, Fensterman, Eisman, Formato, Ferrara & Wolf, LLP, 2019 NY Slip Op 04128, Second Dept 5-29-19

 

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