When a person files bankruptcy, they are required to list all of their assets in their bankruptcy schedules. In bankruptcy, an asset is anything you own, but it also includes anything you may acquire contingent upon some event happening. For example, if you are in a car wreck, you may acquire a cause of action, which is the right to sue someone to recover money damages. A cause of action is intangible. You can’t touch it. You can’t easily measure its value. In fact, it may be worthless because in order to recover money damages, you will have to file a lawsuit, and there is no guarantee of success of litigation. Nevertheless, a cause of action is an asset, and must be listed in schedules when a bankruptcy case is filed.
In the practice of law, there is a common law doctrine called judicial estoppel. Judicial estoppel prevents a party from taking a position in a case which is contrary to a position they have taken in earlier legal proceedings. Bankruptcy courts have applied this doctrine to bankruptcy cases by preventing debtors who fail to list a cause of action as an asset in their schedules from later trying to collect damages in a lawsuit. If you are considering filing bankruptcy, remember to tell your attorney if you have been involved in a car accident, injured on the job, if you are owed money and unlikely to receive payment, of if there is any other reason you think you might be able to file a lawsuit. If you don’t disclose your cause of action you might lose your right to sue.