In re: Jose William Oquendo Claudio; In re: Maria M. Quinones Rivera; In re: Maria Del C. Arroyo Rivera

Opinion

FOR THE DISTRICT OF PUERTO RICO IN RE: : CASE NO. 10-00851 (ESL) : JOSE WILLIAM OQUENDO CLAUDIO : CHAPTER 7 : : Debtor : ____________________________________: IN RE: : CASE NO. 10-001216 (ESL) : MARIA M. QUINONES RIVERA : CHAPTER 7 : : Debtor : ____________________________________: IN RE: : CASE NO. 10-02150 (ESL) : MARIA DEL C. ARROYO RIVERA : CHAPTER 7 : : Debtor : ____________________________________: The above captioned cases are before the court upon the debtors’ request to reopen their individual case in order to amend the schedules to include an undisclosed cause of action and to claim an exemption over the same. The defendant in the undisclosed action, Santander Financial Services, Inc. (“Santander”) has opposed the request on judicial estoppel grounds. The factual background is substantially the same in all three cases. The debtors filed voluntary chapter 7 petitions in February and March 2010. Shortly after the 341 meeting of creditors the chapter 7 trustee in each of the cases filed a report of no distribution. The same was notified to all creditors. The debtors were granted a discharge and the cases were closed in May 2010 and August 2010. The debtors failed to disclose in the schedules filed in their individual bankruptcy cases that they had a prepetition cause of action against Santander. On December 4, 2010, after their bankruptcy cases were closed, they filed an action before the U. S. District Court for the District of Puerto Rico against Santander for violations of the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692, et seq. When Santander moved to dismiss the 1 jaction on grounds of judicial estoppel and lack of standing in the district court case, the debtors opted to move the bankruptcy court to reopen the cases pursuant to 11 U.S.C. § 350(b) alleging that the jinadvertent mistake was counsel’s fault for admittedly lack of experience in bankruptcy matters. On October 31, 2011 the U.S. District Court for the District of Puerto Rico (Gelpi, U.S. District Judge) in case number Civ. 10-2185, José W. Oquendo Claudio, et als v. Santander Financial /Services, Inc., 2011 WL 5163319 (D.P.R. 2011), entered an order dismissing the action on judicial \jestoppel grounds as to the above captioned chapter 7 debtors: Jose W. Oquendo Claudio, Maria M. Quifiones Rivera and Maria Arroyo Rivera. The court declined to dismiss the case as to chapter 13 Carmen Delgado Ramirez. Judicial estoppel is an equitable doctrine aimed at protecting the integrity of the judicial lprocess. New Hampshire v. Maine, 532 U.S. 742, 121 S. Ct. 1808, 149 L. Ed. 2d 968 (2001). The benefits of the bankruptcy process are reserved for the honest but unfortunate debtor. Marrama v. !Citizens Bank of Mass., 549 U.S. 365, 367, 127 S.Ct. 1105, 166 L. Ed. 2d 956 (2007). Judicial llestoppel must be applied in bankruptcy to deter dishonest debtors from failing to fully disclose all jlassets as such failure undermines the bankruptcy system. Section 350(b) of the Bankruptcy Code provides that a case may be reopened “to administer jassets, to accord relief to the debtor, or for other cause.” 11 U.S.C. § 350(b). A decision to reopen bankruptcy case is within the discretion of the bankruptcy court. In re Crocker, 362 B.R. 49, 53 (1* Cir. BAP 2007). When a debtor moves to reopen a case to include an undisclosed asset the most limportant consideration 1s the benefit to creditors. In re Arana, 456 B.R. 161, 173 (Bankr. E.D. New 2011). The undisputed facts in the above captioned cases show that the debtors may not pursue the of action they intend to include in their respective schedules as the same has been dismissed the district court. Consequently, there is no purpose to be served, and no benefit to creditors is \discernible if the cases are reopened. Therefore, the court declines to reopen the cases to include the lundisclosed cause of action. Reed v. City of Arlington, 650 F.3d 571, 574 (5" Cir. 2011) Moreover, property that is not formally disclosed by a chapter 7 debtor is not deemed llabandoned by the Chapter 7 trustee and remains property of the estate. The chapter 7 debtor lacks

1 /standing to prosecute the undisclosed action. In re McLoughlin, 2011 WL 5025335 Bankr. D. Mass October 21,2011); Inre Samayoa, 2011 WL 5041756 (Bankr. D. Mass. October 24, 2011). The party standing to prosecute an action that the chapter 7 debtor failed to disclose for the benefit of creditors is an innocent trustee. Reed v, City of Arlington, 650 F.3d 571 (5" Cir. 2011). In view of the foregoing, debtors’ motions to reopen their respective cases are hereby denied. In San Juan, Puerto Rico, this 28th day of March, 2012.

united states Bankruptoy Judge