What your son did or did not do is not bankruptcy fraud. He innocently omitted listing a potential cause of action. This happens all the time and can be remedied.
Having said the above, your son needs to understand the dynamic that has been created. His case was closed over a year ago. The closing of a case causes an “abandonment” of the assets listed that the bk Trustee did not administer. Once abandoned, the ownership of those assets was returned to your son. The problem your son has is that since he failed to list a “potential cause of action against a prior employer”, that asset was never abandoned. Since it was never abandoned your son has no interest in the cause of action and has no authority to pursue it. All is not lost, but he does have some work to do.
1. He needs to immediately contact the Trustee. Since your son’s cause of action includes a “back pay” component, he would be entitled to claim an exemption for a good portion of the back pay under Mich. Comp. Laws. §600.5311. He needs to supply the Trustee with enough info so that the Trustee can determine if the bk should be reopened to administer the non-exempt component.
2. The Trustee will do one of two things:
a) Advise your son that the asset is of little or no value to the estate and give him the authority to continue pursuing the claim. If this happens, the State Court judge is going to want something in writing, as that Judge has recognized the issues.
OR
b) File a Motion to Reopen the bk to administer an omitted asset. If this happens your son needs to amend Schedule B to list the asset AND amend Schedule C to claim the allowed exemption. The Trustee will then proceed to administer the asset. The problem is that he will settle the claim for a lot less than what it is worth. Once settled, he will give your son the allowed exemption amount and use the balance to pay creditors. Your son’s State court attorney may or may not get paid.
Lastly, your son needs to inform the State Court judge that he is in the process of correcting the problem and ask the judge to place the litigation on hold pending the correction. He does not want the case dismissed.
Again, your son is not “in trouble”. He just needs to correct the honest mistake.
Best regards.
Des.

