In re Zaidi

293 B.R. 861, 2002 Bankr. LEXIS 1721, 2002 WL 32116849
CourtUnited States Bankruptcy Court, E.D. Virginia
DecidedDecember 16, 2002
DocketNo. 98-17100-RGM
StatusPublished

This text of 293 B.R. 861 (In re Zaidi) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Zaidi, 293 B.R. 861, 2002 Bankr. LEXIS 1721, 2002 WL 32116849 (Va. 2002).

Opinion

MEMORANDUM OPINION

ROBERT G. MAYER, Bankruptcy Judge.

THIS CASE was before the court on December 10, 2002, on the motion of Syed H. Zaidi and Shaheen Zaidi to reopen this chapter 7 case and Mr. Zaidi’s Supplementary Memorandum filed on December 11, 2002. The court has reviewed the entire bankruptcy file.

This chapter 7 case was commenced by Syed H. Zaidi and Shaheen Zaidi who filed a voluntary petition pursuant to chapter 7 of the United States Bankruptcy Code in this court on September 25, 1998. The debtors scheduled a medical malpractice [862]*862claim on Schedule B, item 15, in the amount of $21,500.00. They also claimed the asset exempt on Schedule C pursuant to § 34-28.1 of the Code of Virginia. The amount claimed exempt was $21,500.00. This claim of exemption claimed the entire malpractice claim as exempt.

The first meeting of creditors was scheduled for, held on and concluded on October 22, 1998. No objection to the debtors’ claim of the medical malpractice claim was filed within 30 days after the conclusion of the first meeting of creditors. In fact, no objection to any property claimed exempt was ever filed by any party in interest. The debtors were granted a discharge on December 31, 1998. The trustee filed a no distribution report on July 23, 1999 and the case was closed on July 27,1999.

Mr. Zaidi now seeks to reopen the case. The principal purpose is to determine whether the medical malpractice claim was or remains property of the estate and more particularly whether it was property of the estate on particular dates. Mr. Zaidi asserts that his bankruptcy counsel, the trustee, and his medical malpractice counsel acted improperly with respect to this asset, and if it was property of the estate at particular times, seeks to have the conduct of his attorneys and the trustee reviewed by this court.

The court is authorized to reopen cases to administer assets to accord relief to the debtor or for other cause. 11 U.S.C. § 350(b). However, the court should not reopen a case if to do so would accomplish no purpose or would be futile. Thompson v. Commonwealth of Virginia (In re Thompson), 16 F.3d 576, 581-82 (4th Cir.1994) cert. den. 512 U.S. 1221, 114 S.Ct. 2709, 129 L.Ed.2d 836 (1994); In re Carberry, 186 B.R. 401 (Bankr.E.D.Va.1995)(reopening case to schedule omitted creditor would be futile). Thus, the question presented is whether there is any relief that the court may grant to the debtor.

The central issue is whether the medical malpractice claim and settlement proceeds were property of the bankruptcy estate, and if so, the period of time during which they were property of the estate. All property (with certain exceptions, none of which are applicable here) becomes property of the estate upon the commencement of a bankruptcy case. 11 U.S.C. § 541. A case is commenced by the filing of a voluntary petition in bankruptcy, 11 U.S.C. §§ 301, 302. The treatment of property of the estate is different under the Bankruptcy Code of 1978, the law now in effect, than it was under the Bankruptcy Act of 1898. Under the Bankruptcy Act of 1898, exempt property did not become property of the estate. It was not administered by the bankruptcy court. Lockwood v. Exchange Bank, 190 U.S. 294, 23 S.Ct. 751, 47 L.Ed. 1061 (1903). In 1978, Congress intentionally expanded the scope of property of the estate to include all property including property that might be claimed exempt. Exemptions are provided under § 522 of the Bankruptcy Code. The exemptions that may be claimed are those provided in § 522(d) (the federal bankruptcy exemptions) or under § 522(b)(2), (nonbankruptcy exemptions) unless a state has opted out of the federal bankruptcy exemptions in which case only those exemptions allowable under § 522(b)(2) are available. 11 U.S.C. § 522(b)(1). Virginia has opted out of the federal exemptions. Virginia Code § 34-3.1. Consequently, in Virginia, debtors may only claim those exemptions allowed under § 522(b)(2). These include those allowable under state exemptions. One state exemption is § 34-28.1 which exempts personal injury recoveries, which includes medical malpractice claims. In order to claim an exemption in [863]*863bankruptcy, the exemption must be scheduled on Schedule C of the debtor’s schedules.

Mr. Zaidi properly scheduled the malpractice claim on Schedule B and properly exempted it on Schedule C. The trustee and creditors had 30 days from the conclusion of the first meeting of creditors within which to object to his claims of exemptions. F.R.Bankr.P. 4003(b). If no objection is filed within that period, the exemption is allowed and the property ceases to be property of the estate. Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S.Ct. 1644, 118 L.Ed.2d 280 (1992). In this case, neither the trustee nor any creditor filed an objection to the claim of exemption of the medical malpractice claim. On November 21, 1998, 30 days after the conclusion of the first meeting of creditors, all claims of exemption were allowed and, specifically, the medical malpractice claim ceased to be property of the bankruptcy estate. Consequently, the medical malpractice claim (which includes any settlement proceeds) was property of the bankruptcy estate from September 25, 1998, through November 21,1998.

Mr. Zaidi focuses on an order entered by the Circuit Court of Arlington County, Virginia, ordering disbursement of the proceeds of the medical malpractice claim. Mr. Zaidi stated that the total recovery from the medical malpractice action was $20,000.00. There was a dispute between his attorneys and him as to the disposition of the recovery. The recovery was paid into the Circuit Court in the case he brought against his medical provider. This relieved his medical provider of further liability, but permitted the court to determine the proper allocation of the funds between Mr. Zaidi and his attorneys. The fund increased because of interest earned on it. On December 19, 1998, an order disbursing the funds was presented to the Circuit Court. The order was endorsed by his two medical malpractice attorneys, by the bankruptcy trustee, and Mr. Zaidi. Mr. Zaidi endorsed it “seen and objected to court disregarded contract provision for binding arbitration”. Notwithstanding Mr. Zaidi’s objection, the court entered the order authorizing the disbursement of the funds on that date. At the time the order was entered, all of the parties who had an actual or potential interest in the fund were before the court.

At the time the order was actually entered by the court, the trustee had no further interest in the fund because the claim of exemption had been allowed and the property had ceased to be property of the bankruptcy estate.

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Related

Lockwood v. Exchange Bank
190 U.S. 294 (Supreme Court, 1903)
Rooker v. Fidelity Trust Co.
263 U.S. 413 (Supreme Court, 1924)
District of Columbia Court of Appeals v. Feldman
460 U.S. 462 (Supreme Court, 1983)
Taylor v. Freeland & Kronz
503 U.S. 638 (Supreme Court, 1992)
In Re Carberry
186 B.R. 401 (E.D. Virginia, 1995)
Ryan v. Homecomings Financial Network
253 F.3d 778 (Fourth Circuit, 2001)
Thompson v. Virginia
114 S. Ct. 2709 (Supreme Court, 1994)
Thompson v. Virginia
512 U.S. 1221 (Supreme Court, 1994)

Cite This Page — Counsel Stack

Bluebook (online)
293 B.R. 861, 2002 Bankr. LEXIS 1721, 2002 WL 32116849, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-zaidi-vaeb-2002.