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Does a trustee have standing to sue on behalf of a creditor whose claim is unliquidated and has no fixed value?

Canyon Country, CA |

I am a creditor of a corporation that is currently in Chapter 7 bankruptcy. About 2 1/2 years ago I filed a lawsuit against the Corporation before they filed bankruptcy. I have since filed my proof of claim correctly but currently I don't have the finances to continue the suit in bankruptcy or state court and now the trustee is suing third parties to bring money back to the estate. I am worried that the trustee does not have standing to represent my interests as a creditor since the claim is currently still unliquidated and the action is stayed.

Attorney Answers 3

Posted

The Chapter 7 trustee will not represent your individual interest in the estate. If you need to take any action to protect your claim, you need to retain counsel or do it pro se.

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Posted

10th Circuit said Trustee had no standing to assert avoidance claim against a creditor's pre-petition claim against debtor: The 2007 ruling was: In Hill v. Akamai Technologies, Inc. (In re MS55, Inc.), the United States Court of Appeals for the Tenth Circuit concluded that the only rights a chapter 7 trustee inherits from a creditor’s committee are derivative of the debtor’s rights. Therefore, because the terms of a postpetition financing order barred the debtor from bringing certain avoidance actions, the chapter 7 trustee could not bring such avoidance claims following conversion of the debtor’s bankruptcy case from chapter 11 to chapter 7.
Other jurisdictions have held that whether or not the trustee can asset a pre-petition claim belonging to a creditor depends on whether or not the creditor's claim was one any creditor could have asserted or if it was unique to the particular creditor. You might want to review the American Bankruptcy Institute analysis of this issue in its 2008 Spring meeting. Good luck. (http://www.abiworld.org/committees/newsletters/litigation/vol5num3/standing_issues-5-26.pdf

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Posted

The Trustee is not suing on your behalf ... he's suing on behalf of the BK estate. You will share pro-rata in whatever he recovers from the estate based on your claim (assuming it has not been objected to).

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