(CN) – A bankruptcy court has the authority to excuse non-disclosure of financial information after the filing deadline has expired, the 1st Circuit ruled in a case of first impression.
The case marks the first time a federal appeals court has reviewed the financial-disclosure provision of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
Six months after Ivan Acosta-Rivera and his wife, Ana Balseiro-Chacon, filed for bankruptcy, they revealed that their estate included an employment discrimination lawsuit against the husband’s employer.
The Chapter 7 trustee tried to settle the suit for $200,000, but the couple opted to dismiss the bankruptcy action in an attempt to win the lawsuit and an award of up to $2.7 million. The bankruptcy court refused to dismiss the case.
The district court ruled that the bankruptcy court did not have the authority to excuse the non-disclosure. Judge Selya of the Boston-based federal appeals court reversed the decision.
“Common sense suggests that Congress never intended to strip the bankruptcy court of the flexibility needed to respond intelligently to the emergence of such a circumstance after the 45-day filing deadline has expired,” Selya wrote.