Whether plaintiffs could pursue their medical malpractice action against defendants even though the action was part of their bankruptcy filing; Real party in interest; MCR 2.201(B); Miller v. Chapman Contracting; Principle that when a debtor files a Chapter 7 bankruptcy petition, all of the debtor’s assets become property of the bankruptcy estate; 11 USC § 541; A debtor’s right to claim an exemption for an interest in a potential cause of action; §§ 522(d)(11)(D) & (l); Schwab v. Reilly; Szyszlo v. Akowitz

The court held that the trial court erred by granting defendants-medical facility and nurse practitioner summary disposition of plaintiffs-husband’s (Karas) and wife’s medical malpractice action based on a lack of standing. Plaintiffs sued defendants for medical malpractice alleging Karas’s back pain and fatigue worsened due to an “ill-advised medication change and caused other attendant problems.” They subsequently filed for Chapter 7 bankruptcy and claimed an exemption for their medical malpractice action. Defendants successfully sought summary disposition on the basis that all of plaintiffs’ assets, including their medical malpractice action, became the sole property of the bankruptcy estate and the bankruptcy trustee was the only real party in interest and the only party who had standing to pursue the action. The trial court also denied plaintiffs’ motion for reconsideration. On appeal, the court agreed with plaintiffs that the trial court erred by granting summary disposition for defendants because they were real parties in interest when they properly claimed an exemption for their medical malpractice action from their bankruptcy estate. “[I]t is undisputed that plaintiffs claimed an exemption for this medical malpractice claim when they filed their petition for Chapter 7 bankruptcy without objection.” As such, the exemption “was valid and vested plaintiffs with a present and substantial interest in this case.” It also noted that, “[m]inimally, the information contained in Schedule C of the bankruptcy petition and the affidavits that plaintiffs filed with their motion for reconsideration created a genuine issue of material fact regarding whether plaintiffs properly claimed an exemption for this malpractice action and, therefore, had standing as real parties in interest.” Vacated and remanded.