Bankruptcy – Tort claims

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U.S. Court of Appeals For the Seventh Circuit

Civil

Bankruptcy – Tort claims

It was error for the district court to cap a discharged debtor’s tort claim at the amount of discharged debt.

“Whether Matichak tried to hide the claim in the bankruptcy is a question more appropriately addressed to the bankruptcy judge, who can decide (if the Trustee prevails in this tort suit) what disposition to make of any proceeds that remain after paying counsel and the creditors. Allowing the tort suit to proceed without a damages cap will ensure that the creditors receive their due—for the full stakes will allow the Trustee to hire counsel to take the suit on a contingent fee. If it turns out that Matichak was trying to deceive his creditors, the bankruptcy judge may decide to give the creditors a bonus, or perhaps to return any excess to the defendants in this tort suit. Either way, the creditors will escape injury at Matichak’s hands because it will remain economically feasible to prosecute the tort suit.”

Reversed.

14-8030 Metrou v. M.A. Mortenson Co.

Appeal from the United States District Court for the Northern District of Illinois, Marovich, J., Easterbrook, J.

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