In the case of Tekippe, Joseph W. and Jamie L.; In re, a bankruptcy trustee auctioned off the debtors' lawsuit against the state of Iowa against the wishes of the debtors. The debtors who flied for Chapter 7 bankruptcy listed their interest in a pending lawsuit against the State of Iowa as an asset.
The bankruptcy trustee determined that the lawsuit was the debtors' only valuable asset; but the debtors did not claim the interest as exempt property. The bankruptcy court gave the trustee the power to auction the property despite the debtors' objection and offers to repurchase the property back from the estate.
The court stated: "The responsibility of Trustee is to maximize assets and the best way to do so is to auction the asset to the highest bidder."
What I suspect is that these debtors failed to take a close look at their assets and plan accordingly before filing Chapter 7 bankruptcy. If you are considering filing for Chapter 7 bankruptcy and have a pending lawsuit or settlement speak with a bankruptcy attorney about how this will be handled in the Chapter bankruptcy proceeding before you file.