Wisconsin court dismisses debtor’s FDCPA and FCRA claims because they were not abandoned by the trustee in prior bankruptcy, but debtor given leave to fix the standing problem

The debtor in Kitchner v. Fiergola, et al., No. 18 CV 133 (E.D. Wis. Sept. 18, 2018) brought suit under the Fair Credit Reporting Act (“FCRA”) and Fair Debt Collection Practices Act (“FDCPA”) against several attorneys for disclosing her credit score and history in a complaint they filed in a collection action against her. The district court denied the debt collectors’ motion to dismiss, but held that because the debtor’s claim arose prior to the debtor filing for Chapter 7 bankruptcy relief, and the debtor failed to disclose the existence of the claim in the bankruptcy, the claim remained property of the bankruptcy estate making the trustee the only proper real party in interest for purpose of enforcing the claim. Accordingly, the court ordered the debtor to either amend the complaint substituting the trustee as the plaintiff or file a notice with evidence demonstrating the trustee’s abandonment of the causes of action.

In a personal bankruptcy, the debtor is required to disclose all existing assets, including causes of action the debtor might have against third parties. The debtor in this case did not disclosure the existence of her FCRA and FDCPA claims, despite their having arisen prior to the filing of the petition. Nevertheless, all causes of action became property of the bankruptcy estate whether or they the debtor disclosed them. Any property of the estate that has not been expressly abandoned or administered by the trustee at the time the case is closed remains property of the estate. Consequently, the debtor’s causes of action that were initially property of the estate remained property of the estate even though her bankruptcy case was closed. The trustee is the authorized representative of the estate, and for that reason, he was the only real party in interest for purposes of pursuing the claims.

The court nevertheless denied the debt collectors motions to dismiss for lack of standing by applying Rule 17 which instructs that “(t)he court may not dismiss an action for failure to prosecute in the name of the real party in interest until, after an objection, a reasonable time has been allowed for the real party in interest to ratify, join, or be substituted into the action.” The court gave the debtor 30 days to correct her mistake.

The debt collectors also argued that the debtor should be judicially estopped from pursuing the claims regarding of standing because she willfully – or at least negligently – failed to be forthright with the bankruptcy and the district court and should not be allowed to correct her mistake. The court disagreed, noting that because the trustee never abandoned the claims, the estate possessed them, and therefore, the only person who could take inconsistent positions that would jeopardize the claims for purposes of judicial estoppel was the trustee.

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