Do I need to disclose my disability insurance claim if I filed for bankruptcy?

Do I need to disclose my disability insurance claim if I filed for bankruptcy?
Yes. If you file for bankruptcy it is imperative that you disclose your disability insurance claim regardless of the stage that your claim is in – application, denial, appeal, pending litigation, etc.

The Bankruptcy Code and Rules impose an express and affirmative duty on individuals filing for bankruptcy to disclose all assets – to include contingent and unliquidated claims. Under the Code the duty to disclose during a bankruptcy proceeding is a continuing duty requiring the debtor to disclose all potential causes of action. This requirement does not mean that the debtor know all the facts of the action or even the legal basis of a cause of action; it only requires that if someone has a possible cause of action then that cause of action is determined to be “known” by the debtor and subject to disclosure. Failure to disclose a disability insurance claim during a bankruptcy proceeding can in turn prevent a claimant from pursuing legal action against an insurance company for failure to pay a claim for disability benefits.

In a recent case out of a Texas a Federal District Court was presented with such a situation. In the case of Casandra Kidd v. Prudential Insurance Company of America, Kidd filed a lawsuit under ERISA against Prudential for failure to pay her disability insurance benefits following a February 26, 2014 denial of her claim. From a procedural standpoint Kidd filed her administrative appeals as required under ERISA and her long term disability policy. On March 11, 2016, following the filing of her appeals, Prudential advised Kidd it was upholding the denial of her claim for benefits and notified her that she had exhausted all administrative remedies under ERISA. A lawsuit was then filed against Prudential in August of 2016. However, in February 2015, Kidd filed a bankruptcy petition and at no time did she disclose her disability insurance claim with Prudential in the bankruptcy proceeding. Kidd subsequently received a no asset discharge and her bankruptcy case was terminated in June 2015.

Following the filing of the ERISA disability insurance lawsuit in August of 2016, Prudential’s attorneys filed a Motion to Dismiss Kidd’s Complaint asserting the legal doctrine of Judicial Estoppel, which is “a common law doctrine by which a party who has assumed one position in the pleadings may be estopped from assuming an inconsistent position.” Courts have further elaborated on this doctrine noting its purpose is “to protect the integrity of the judicial process” by “preventing parties from playing fast and loose with the courts to suit the exigencies of self-interest.”

The Fifth Circuit, the federal judicial circuit which Texas is in, has three requirements for judicial estoppel:

(1) the position of the party against whom judicial estoppel is sought is plainly inconsistent with its prior legal position;
(2) a court accepted the prior position; and
(3) the party did not act inadvertently.

Kidd conceded the first requirement – that her legal position in her bankruptcy case that she had no assets related to the Prudential policy was inconsistent with her current position that she has a right to disability benefits (assets) under the Prudential policy; and the second requirement that the bankruptcy court accepted her assertion that she had no assets related to the Prudential policy. The Court was then left to determine whether Kidd acted inadvertently.

Kidd argued in response to the Motion to Dismiss that she did not know she had a valid claim against Prudential for her disability benefits and that her attorneys failed to communicate with her during the administrative appeal process. As such she asserted that she thought she did not have a valid claim against Prudential. The Court notes in its opinion that Kidd alleged that it wasn’t until September 2015 when she spoke to her present attorney (who did not represent her during the appeal process) that she had a valid claim against Prudential for her disability insurance benefits. The Court dismissed that argument noting that due to the fact Kidd had hired an attorney to file her administrative appeals with Prudential she is not justified in asserting a lack of knowledge of a claim. The Court goes on to further note that a week before Kidd filed for bankruptcy her attorney at the time copied her on a letter appealing the claim denial. In light of the preceding the Court determined that Kidd failed to show that she lacked knowledge of the “undisclosed claim.”

The Court also found that Kidd failed to show a lack of motive to conceal the Prudential claim from the bankruptcy court referencing that the Fifth Circuit had previously held that a party in circumstances similar Kidd would have a financial incentive to not disclose information in the form of a potential windfall (receipt of disability insurance benefits). The Judge stated, “Plaintiff has the potential to collect her insurance claim after having received the benefit of failing to disclose it to her creditors in her bankruptcy proceeding, a windfall that the judicial estoppel doctrine is designed to prevent.”

Based on the above the Court granted Prudential’s Motion to Dismiss Plaintiff’s Complaint.


Many people faced with a denial of disability benefits and no source of income find themselves in extreme financial hardship that can often lead to the filing on bankruptcy. This case serves as a very important warning that if you file for bankruptcy you must list your disability insurance claim as an asset regardless of whether you are receiving it or not. Failure to do so could nullify any legal remedy you have against your disability insurance carrier in the event of a claim denial. If you are represented by counsel for your disability claim or bankruptcy claim it is imperative you discuss this issue with your attorney.

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Do you work in my state?

Yes. We are a national disability insurance law firm that is available to represent you regardless of where you live in the United States. We have partner lawyers in every state and we have filed lawsuits in most federal courts nationwide. Our disability lawyers represent disability claimants at all stages of a claim for disability insurance benefits. There is nothing that our lawyers have not seen in the disability insurance world.

What are your fees?

Since we represent disability insurance claimants at different stages of a disability insurance claim we offer a variety of different fee options. We understand that claimants living on disability insurance benefits have a limited source of income; therefore we always try to work with the claimant to make our attorney fees as affordable as possible.

The three available fee options are a contingency fee agreement (no attorney fee or cost unless we make a recovery), hourly fee or fixed flat rate.

In every case we provide each client with a written fee agreement detailing the terms and conditions. We always offer a free initial phone consultation and we appreciate the opportunity to work with you in obtaining payment of your disability insurance benefits.

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No. For purposes of efficiency and to reduce expenses for our clients we have found that 99% of our clients prefer to communicate via telephone, e-mail, fax, sessions, or Skype. If you prefer an initial in-person meeting please let us know. A disability company will never require you to come to their office and similarly we are set up so that we handle your entire claim without the need for you to come to our office.

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When you call us during normal business hours you will immediately speak with a disability attorney. We can be reached at 800-682-8331 or by email. Lawyer and staff must return all client calls same day. Client emails are usually replied to within the same business day and seem to be the preferred and most efficient method of communication for most clients.

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Jeff P. (Oklahoma)

After a very long and frustrating ordeal to keep my LTD payments coming I decided to seek assistance from and attorney. After much research and asking those in the legal profession Dell & Schaefer seemed to be the top choice. I reached out and Alex Palamara was the attorney assigned to my case. All I can say is the experience was outstanding. Both Alex and his Paralegal, Danielle Lauria were excellent to work with. They were very kind, concerned, understanding of my frustrations and treated me with the utmost respect. Communication was excellent with regular updates and telling me what I could expect in each stage of the process.

Alex was also very straight forward with what to expect and no pie in the sky promises or expectations were made. In the end we won our case and I believe it was solely due to their experience and knowledge of not only the laws but the insurance companies as a whole. I would highly recommend them and am very grateful for the help they afforded to me.

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