I’ve been a bit busy lately, and haven’t posted anything for a while. I plan to remedy this over the next couple of weeks. This post begins that process of “blogging rehabilitation.”
Some time ago I posted an article discussing the consequences of omitting a creditor in a debtor’s bankruptcy papers. Recently, I had an interesting email exchange with a colleague, that explored the question in a bit more depth. This post gives you that email exchange. I hope you find it interesting. In the interests of privacy I have changed any personal identifiers.
I. The Question My Fellow Attorney Posed
We all know that per In re Beezley that failure to schedule a creditor in a no-asset Chapter 7 case does not affect the dischargeability of any debts. This works both ways, in that debts that would be dischargeable (but for failure to schedule) are discharged, but also that debts that would NOT be dischargeable (such as DSO’s, certain taxes, etc.) are not discharged. My question regards those types of non-dischargeable debts which are not self-executing, namely fraud claims (523(a)(2)). Since these aren’t really non-dischargeable unless and until a court makes a finding of the requisite fraud, is there any time limit for a creditor to reopen the bankruptcy case to litigate the fraud claim if they weren’t scheduled?
The specific facts I’m dealing with are: Debtor filed Ch. 7 and got their discharge. Debtor failed to list a certain creditor. Debtor later seeks to reopen Chapter 7 case to amend schedules and add creditor. Court allows it for some reason, and debtor amends. Creditor files lawsuit in state court against debtor claiming breach of promise and fraud for prepetition debts.
My bigger question is: Am I “safe” to file an OSC re: contempt for violating section 524 or, per Beezley, was this debt not discharged?
II. My Response
I offer my thoughts with a suggestion on the OSC motion.