Does All Property Owned by a Debtor Vest In the Bankruptcy Estate If a Petition for Voluntary Bankruptcy Is Filed ?
In DeLarco v. DeWitt, plaintiff had sued his former attorney in 1986 for legal malpractice arising, inter alia, out of the 1983 purchase of a piece of real property.
Plaintiff's former attorney had continued to represent plaintiff through August 30, 1985, and plaintiff had consulted other counsel earlier in August 1985 who had advised him that a claim for malpractice could be brought in connection with the 1983 real property transaction.
In December 1984, plaintiff had filed a chapter 13 petition in bankruptcy, which was converted to a chapter 7 case in November 1985.
Plaintiff received a bankruptcy discharge on April 8, 1986, and, a few days later, instituted the malpractice action.
The Appellate Division, Third Department, upheld the dismissal of the malpractice action for lack of plaintiffs' legal capacity to sue, reasoning that, all bases of the claimed legal malpractice having accrued between 1983 and August 1985, all should have been listed on the original bankruptcy petition (or on a possible amended schedule of assets).
In affirming trial term's dismissal, the DeLarco court wrote that, "upon the filing of a voluntary bankruptcy petition, all property which a debtor owns or subsequently acquires, including a cause of action, vests in the bankruptcy estate (see, 11 USC 541 [a] , ; Schepmoes v. Hilles, [122 AD2d 35, 36])" (supra, 136 AD2d, at 408).