Motion for Relief -

In re McMinn, - B.R. , 2011 WL 2945787 (Bankr. D. Kan. Jul 18, 2011) HELD: COURT COULD GRANT EXTENSION OF STAY WITHOUT AN ACTUAL HEARING - MOTION FILED 2 DAYS PRIOR TO 30TH DAY EXPIRATION

Automatic stay——Extension under Code § 362(c)(3): Although the debtor filed her motion to extend the automatic stay under Code § 362(c)(3) only two days before the time expired to hold a hearing, the court could grant the motion without holding a hearing in the absence of any objections.

While § 362(c)(3)(B) provides that the court may grant the motion ““after notice and a hearing completed before the expiration of the 30-day period,”” Code § 102(1) states that ““after notice and a hearing”” means ““such opportunity for a hearing as is appropriate in the particular circumstances,”” and this allows the court to expedite or dispense with hearings when speed is essential.
CLICK FOR FOR TEXT OF OPINION

In re Ketaw, __ B.R. ___ case no. 1:11-bk-380) (Bankruptcy Judge S. Martin Teel Jr.)
HELD: MOTION TO EXTEND STAY DENIED WHERE INSUFFICIENT TIME TO HOLD HEARING

Motion to extend stay under Code § 362(c)(3) was not filed in time to allow hearing:

The debtor's Emergency Motion to Extend the Automatic Stay would be denied, as the motion was not filed in sufficient time to permit, as required by Code § 362(c)(3)(B), an order to issue “after notice and a hearing completed before the expiration of the 30–day period” after the filing of the case, where the debtor filed the motion at 5:47 p.m. on the 30th day after the commencement of the case.

As a practical matter, the 30–day deadline of § 362(c)(3)(B) imposes upon the debtor's counsel these obligations:
· A motion for relief under that provision must be filed with, or promptly after, the filing of the debtor's petition.
· The motion must include a notice under Local Bankruptcy Rule 9013–1(b)(3) and Local Official Form 3 of the opportunity to oppose the motion.
· The debtor's counsel must obtain a hearing date from the clerk, and must give notice of that hearing with the filing of the motion, or shortly thereafter, in order to assure that, with reasonable advance notice to affected creditors, any actual hearing is held prior to the expiration of the 30–day deadline. CLICK FOR FULL TEXT OF OPINION

Community Discharge: Subsection (a) of 11 U.S.C. §524 addresses the split discharge, when only one spouse attains a discharge in bankruptcy, in community property states.  The legislative history of this section says that "if community property was in the [bankruptcy] estate and community claims were discharged, the discharge is effective against the community creditors of the nondebtor spouse as well as of the debtor spouse.  House Report No. 95-595, 95th Cong., 1st Sess. 365-6 (1977), Senate Report No. 95-989, 95th Cong., 2d Sess. 80 (1978). § 524(a)(3) treats the effect on the nondebtor spouse of a discharge of a debtor in a community property state when the nondebtor spouse is liable on the community claim, but has not filed a bankruptcy petition. That is, if one spouse in a community property state has commenced a bankruptcy case where, as here, no claim is excepted from the debtor's discharge and is not otherwise found to be nondischargeable, and if the nondebtor spouse would     not have had a claim excepted from her discharge in a hypothetical case commenced on the same day as the commencement of the debtor's case, then the creditors of either spouse holding community       claims on the date of bankruptcy are thereafter barred from asserting claims against after acquired community property. It was the duty of the scheduled creditors in the Braden Jay Karber bankruptcy proceedings to object to the hypothetical discharge of Valerie Karber, as the nondebtor spouse, within the same time limits as their objections to the discharge of Braden Jay Karber. 11   U.S.C. § 524(b). No such objections were filed and thus all community creditors before the Court in that case are now barred from seeking to collect their deficiencies from the after acquired      community property of either Braden Jay Karber or Valerie Karber.  In re Karber 25 B.R. 9, 12 (Bkrtcy.Tex.,1982)   See also In re Dyson 277 B.R. 84 (Bkrtcy.M.D.La.,2002)

Branigan v. Bateman, No. 07-1030, 07-1307 (4th Cir Ct App, 2/4/08)
Orders denying motions to dismiss Chapter 13 petitions and confirming debtors' plans are affirmed over claims that, since the debtors are ineligible for discharges under 11 U.S.C. section 1328(f), they should not be allowed to file a Chapter 13 petition.  Not bad faith to file case where no discharge can be entered.  Time frame for filing runs from date of Petition to date of Petition, not date of discharge.

Creditor not listed in chapter 7 bankruptcy, discharge entered - omission was unintentional: 9^th Cir. No asset, ct declined to reopen – no need to reopen because creditor suffered no prejudice; bankruptcy proof of claim deadline has not come and gone.  In re Beezley, 994 F.2d 1433 (9th Cir. 1993) see also State of Texas v Walker, (5^th Circ 1998) - endorsed Beezley.  The First Circuit contrasted the Ninth Circuit's approach with the Seventh Circuit's decision in In re Stark, 717 F.2d 322 (7th Cir. 1983) and went with the Seventh Circuit's analysis.  2009 the First Circuit held that where a claim is not listed and the creditor is not notified of the bankruptcy, and does not otherwise learn of the bankruptcy, the debt is not discharged due to section 523(a)(3)(A).  Colonial Sur. Co. v. Weizman, 564 F.3d 526 (1st Cir. 2009).  The First circuit recognized that the Ninth Circuit had adopted a version of the "no harm, no foul" approach to the discharge of unlisted claims in no assets cases, which most circuits have followed as in Beezley.  

In re Lasko - failure to list creditor, if no asset then debt is discharged.

In re Nielsen (09/07/04 - No. 02-35983, 9th Cir Ct. Apps) Failure to list a creditor in a no-assets, no-bar-date Chapter 7 bankruptcy does not justify revocation of the discharge.  http://caselaw.lp.findlaw.com/data2/circs/9th/0235983p.pdf

MCGHAN v. RUTZ (05/07/02 - No. 99-56956) (9th Cir Ct Apps)  State courts lack 1) jurisdiction to determine whether a listed and scheduled creditor received adequate notice of discharge proceedings and 2) authority to modify bankruptcy court orders discharging a claim and enjoining collection on a debt; bankruptcy court was required to reopen proceedings to protect jurisdiction over enforcement of its own orders.  http://caselaw.lp.findlaw.com/data2/circs/9th/9956956p.pdf

OMITTED CREDITORS IN CHAPTER 7 (as provided by Dan Furlong)

• A CASE WITH NO DEADLINE TO FILE PROOF OF CLAIM AND OMITTED CREDITOR DOES NOT HAVE A FRAUD ETC. CLAIM

A debt is discharged in most chapter 7 bankruptcy cases, even if the debt is not listed in the bankruptcy and the creditor is not notified of the bankruptcy. The following must apply:

1. The Court never set a deadline for creditors to file a proof of claim. This is true in most cases, because they are no asset cases. The unlisted creditor is not harmed, because there was no distribution for the creditor to receive.

2. The creditor does not have the type of claim for which the creditor could have filed a lawsuit in the bankruptcy court to have the debt declared not discharged, such as for fraud or intentional injury.

3. The creditor does not have the type of claim which is never discharged, such as child support, spousal maintenance, most taxes, etc.

The bankruptcy courts will not normally allow a closed case to be reopened for the purpose of listing an omitted creditor, since there is no need. 

• A CASE WITH A DEADLINE TO FILE PROOF OF CLAIM AND OMITTED CREDITOR DOES NOT HAVE A FRAUD ETC. CLAIM

If the court set a deadline for filing proofs of claim, then the creditor is not discharged if the creditor was not listed in the bankruptcy and did not otherwise receive notice of the bankruptcy in time to file a proof of claim.

It is the deadline for the filing of a proof of claim that is important. It does not matter whether the creditor would have received any distribution from the trustee on the claim. It does not matter that no distribution was made by the trustee to any creditors. It does not matter if a distribution was made by the trustee, which the omitted creditor would not have been paid anything if a proof of claim had been timely filed. (Such as if the distribution went all towards administrative costs and priority claims.)

However, a creditor, trustee, or any personal liable with the debtor on a debt has 30 days after the normal deadline in which to file a proof of claim on behalf of a creditor if a creditor fails to do so by the normal deadline. If a debtor failed to list a creditor, and the creditor did not know of the bankruptcy, and there was a deadline to file a proof of claim, and the creditor did not file a proof of claim by the deadline, the creditor would be discharged if the debtor filed a proof of claim on behalf of the creditor within the extra 30 days. In re Hatley, 20 CBN 404 (Bankr. E.D. Tenn. 2010). 

• A CASE WHERE THE OMITTED CREDITOR DOES HAVE A FRAUD ETC. CLAIM

The rules are different for an omitted creditor that has the type of claim for which the creditor could have filed a lawsuit in the bankruptcy court to have the debt declared not discharged, such as for fraud or intentional injury. Such an unlisted creditor is not bound by the normal statute of limitations to file a non-discharge suit, which is 60 days after the meeting of creditors.

If this creditor is not listed in the bankruptcy or did not otherwise receive notice of the bankruptcy in time to file a non-discharge suit, then this unlisted creditor is not discharged.

Rather, the debtor loses the right to raise the deadline as a defense to such a claim. The creditor still must file a suit under section 523 to determine the dischargeability of the debt. The debt is not automatically excepted from discharge simply because the creditor was not notified. If the creditor later learns of the bankruptcy, the creditor must then file a complaint and prove the debt is the type of debt not discharged before the creditor takes additional collection actions.

The creditor may lose the right to file the 523 suit if the creditor waits an unduly long period of time after learning of the bankruptcy. Under certain limited circumstances, laches may bar the 523 complaint. In re Staffer, ______F.3d _______, 9th Cir. September 27, 2002; Beaty v. Selinger, ______F.3d _______, 9th Cir. September 26, 2002. The suit may possibly be filed in state or bankruptcy court.

(One court has ruled that the debt is not discharged if the debtor intentionally failed to list the debt in time for the creditor to file a complaint objecting to discharge before the deadline, and if this is proven, then the creditor need not prove the debt is the type of debt not discharged. (see Chart #2)  In re Paylan, 18 CBN 1113 Bankr. M.D. Fla. 2008). Collateral estoppel or issue preclusion applies only if the issue was actually litigated. A default judgment is not litigated.

Therefore an Arizona state court default judgment for fraud does not establish fraud in a later non-discharge suit in bankruptcy court under sec 523. Weber vs. Grindle Audio Productions, Inc.,

1CA-CV, 02-0008, Ariz. Court Of Appeals, November 21, 2002. 

• DEALING WITH THE OMITTED CREDITOR

The difficulty is convincing an omitted creditor that its claim was discharged and that the post-discharge injunction of 11 USC §524 prohibits collection efforts. At a minimum the creditor should be sent a letter advising of the law and the court rulings, which are in the following cases. The debtor may re-open the bankruptcy and request sanctions against a creditor that refused to stop collection efforts. 

• CASES

In re Beezley, 994 F.2d 1333, 9th Cir. 1993;

In re Neilsen, 02-35983, 9th Cir. filed September 7, 2004.

Weber vs. Grindle Audio Productions, Inc., 1CA-CV, 02-0008,Ariz.

Court Of Appeals, November 21, 2002.

Jones V. Warren Construction, No. 302-09099, Adv. No. 30-0216A,

Judge Keith Lundin, Bankruptcy Court, Middle District of Tennessee, August 6, 2003.

In re Staffer, ______F.3d _______, 9th Cir. September 27, 2002;

Beaty v. Selinger, ______F.3d _______, 9th Cir. September 26, 2002