Supreme Court dismisses suit filed against bankrupt individual

The Supreme Court dismissed a lawsuit seeking property handover and unjust enrichment returns because the plaintiff had sued an individual who had already been declared bankrupt. The court ruled that such claims must be directed at the bankruptcy trustee managing the estate rather than the debtor personally.

In the specific case adjudicated, a son had purchased real estate using his father as an agent. After the father took possession and use of the property, he was declared bankrupt. The son subsequently sued the father for the return of the property and unjust enrichment returns while bankruptcy proceedings were underway.

The court determined that the son's claims constituted exercises of recovery rights or claims against the bankruptcy estate. Since these matters fell under the jurisdiction of the estate, suing the father directly was improper given his lack of legal standing. The ruling, issued May 8 in case 2025Da220617, clarified that applications to substitute parties in ongoing lawsuits based on the premise that the case was continuing against the debtor are not permitted.

Under the Debtor Rehabilitation and Bankruptcy Act, all domestic and foreign property held by a debtor at the time of a bankruptcy declaration automatically constitutes the bankruptcy estate. The exclusive right to manage and dispose of these assets transfers immediately to the bankruptcy trustee, who is tasked with liquidating property to distribute proceeds to creditors and pay estate debts.

Consequently, any litigation concerning the estate must name the trustee as the proper party. The court stated that lawsuits filed against a debtor after a bankruptcy declaration are illegal and subject to dismissal because the debtor loses standing to represent the estate.