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Home / Case Digests / U.S. District Court / Bankruptcy / Bankruptcy Court, WDNY — Litigation Proceeds: In re Ciara N. Minor

Bankruptcy Court, WDNY — Litigation Proceeds: In re Ciara N. Minor

U.S. Bankruptcy Court, WDNY

Litigation Proceeds

Pre-Settlement Agreements — Bankruptcy Estate

In re Ciara N. Minor
09-12095 B
Judge Bucki

Background: The trustee commenced an adversary proceeding to determine the validity and extent of the respective interests of the debtor, of an investor called Pre-Settlement Finance LLC and of the bankruptcy estate. PSF and the debtor had entered into a number of agreements while a negligence action stemming from a motor vehicle accident involving the debtor was pending. The debtor had agreed to compensate PSF from the proceeds of her lawsuit in exchange for cash advances. The debtor filed for Chapter 7 prior to the resolution of her case and asserted an exemption to the first $7,500 of any recovery from the personal injury action.

Ruling: The Bankruptcy Court concluded that PSF created an arrangement that gave itself nothing more than a minimally enforceable interest in equity. PSF had the right to recover litigation proceeds to which the debtor may be personally entitled, but cannot share in any proceeds that have become non-exempt assets of the bankruptcy estate. The debtor’s $7,500 exemption was allowed and may be disbursed to PSF. The remaining proceeds of litigation was to remain with the bankruptcy estate.

Harold P. Bulan of Bulan, Chiari, Horwitz & Ilecki for the Chapter 7 Trustee; Eric A. Trischwell, Robert T. Schmidt, and Marjorie E. Sheldon of Kramer Levin Naftalis & Frankel for Pre-Settlement Finance LLC