(LAW JOURNAL NEWSLETTERS) — Bankruptcy law is extremely complicated. On the one hand, bankruptcy laws are designed to help people get out of debt who cannot get out. Bankruptcy laws help give the person in debt, who is called the “debtor” under the U.S. Bankruptcy Code, a new beginning financially. On the other hand, creditors, which is the label give those to whom money is owed by the debtor, have a chance to recoup some of their losses because they were not paid. The debtor holds an obligation to explain all of the losses and assets they have when filing a bankruptcy petition. A recently published article in the Law Journal Newsletters addresses how the timing of a product liability injury settlement could negatively affect a bankruptcy filing.
The article discusses a bankruptcy case involving a woman from New York. She filed a petition under Chapter 7 of the Bankruptcy Code. She declared all of her assets and losses as required by law, and the Bankruptcy trustee closed the case. Five years before the petitioner filed for bankruptcy, she had a pelvic mesh sling implanted. She filed her bankruptcy petition without disclosing the possibility she might have a potential legal claim against the medical device manufacturer that made the pelvic mesh.
About five years after she filed the bankruptcy case, the woman learned that she could have a legal claim against the maker of the pelvic mesh after the FDA issued a warning about the dangers associated with pelvic mesh. The woman filed a claim with the manufacturer of the mesh even though she did not sustain an injury. She settled the case with the medical device manufacturer for just over $100,000.00.
The bankruptcy trustee who presided over her filing reopened the case and argued that the debtor should have declared the potential settlement as an asset. Through years of litigation, the court ruled in her favor. She won because she did not sustain any injuries from the mesh and only found out about the possibility of a claim because of the FDA. The case would have turned out differently if she filed a claim because of an injury from the pelvic mesh.
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