In re Anderson

• Decision Date: 17 April 1987
• Docket Number: Bankruptcy No. 4-82-2171.
• Citation: 72 BR 495
• Parties: In re Hellen ANDERSON and Allan Anderson, Debtors.
• Court: U.S. Bankruptcy Court — District of Minnesota

72 B.R. 495 (1987)

In re Hellen ANDERSON and Allan Anderson, Debtors.

Bankruptcy No. 4-82-2171.

United States Bankruptcy Court, D. Minnesota.

April 17, 1987.

Lea M. De Souza, Lang, Pauly & Gregerson, Ltd., Minneapolis, Minn., for Creditor Robert S.C. Peterson, Inc.

Rockford R. Chrastil, Chrastil & Steinberg, Minneapolis, Minn., for debtors.

ORDER DENYING MOTION TO REOPEN CASE

ROBERT J. KRESSEL, Chief Judge.

This case came on for hearing on the motion of debtor Allan Anderson to reopen this case under 11 U.S.C. § 350(b) and Bankruptcy Rule 5010. Rockford R. Chrastil appeared for the debtor and Lea M. De Souza appeared on behalf of Robert S.C. Peterson, Inc. in opposition to the motion. Based on the files, records and argument of counsel, I make the following:

MEMORANDUM ORDER

The debtor Allan Anderson together with his wife Hellen Anderson filed a Chapter 7 bankruptcy petition on December 1, 1982. Peterson was listed on the debtors' schedule of unsecured creditors. However, the addresses used for the creditor on the schedule and the mailing matrix were such that the clerk's notice of the case apparently did not reach Peterson, and Peterson's principals deny that they ever had any actual notice of the case until after an arbitration proceeding was commenced in 1984 in an attempt to collect Peterson's debt from Anderson. On September 12, 1986, after approximately two years of arbitration,¹ Peterson filed a complaint to determine the dischargeability of Anderson's debt to Peterson.² On February 17, 1987, Anderson filed this motion to reopen the case for the purpose of amending the debtors' schedule of unsecured creditors to list Peterson's correct address.

Anderson believes that amending his schedule would advance his position in the pending dischargeability proceeding and based on developing case law, there is much support for his belief. In fact if those cases are to be believed, allowing the case to be reopened and an amended schedule filed would be determinative of the dischargeability proceeding. See Rosinski v. Boyd (In re Rosinski), 759 F.2d 539 (6th Cir.1985) and Stark v. St. Mary's Hospital (In re Stark), 717 F.2d 322 (7th Cir.1983). The cases talk of reopening a case "to discharge a debt." While not always articulated, I think the argument goes as follows: the exception to discharge in § 523(a)(3)(A) is for debts "neither listed nor scheduled . . . in time to permit . . . timely filing of a proof of claim. . . ." If no claim filing period was ever fixed and if the case is reopened the debtor can file an amended schedule of creditors listing the previously omitted creditor. Since the debt is now listed or scheduled, it is discharged.

While many of those cases contain interesting analyses of issues of dischargeability and reach the correct result, they are inappropriately applied in the context of the reopening of a case and are for the most part based on false premises regarding the nature and effect of a discharge. It is very likely that this line of cases will be impossible to stop and by writing this opinion I will fare no better than King Canute³ in his attempt to prevent the tide from rising on the shores of England.

A discharge under 11 U.S.C. § 727 acts as a discharge of all debts and operates as an injunction against any attempt to collect those debts pursuant to 11 U.S.C. § 524(a). However, § 523(a) lists a number of debts that are excepted from discharge and provides that a discharge does not discharge an individual from those debts. Thus while it is not entirely obvious, careful analysis reveals that the scope of a discharge is final when entered and subsequent events do not change what debts were or were not discharged by that discharge. However under § 523, certain debts are excepted from the discharge when entered.⁴ Unfortunately, it is not always obvious which debts were excepted from the discharge and which debts were not, and therefore there may have to be a judicial determination of which debts were excepted from discharge. Since discharge in bankruptcy is an affirmative defense under Fed.R. Civ.P. 8(c) and similar state rules, that determination may have to be made by a court when an attempt is made to collect that debt.

Often, however, a complaint is filed in the bankruptcy court either before or after the discharge to litigate whether or not a certain debt was covered by the discharge or whether it was excepted from the discharge. Such actions are in the nature of actions for declaratory judgment since the relief sought is a determination of the dischargeability of the debt. The relief that would be granted to a debtor would not be an order that discharged the debt in question since that debt would already have been discharged. Rather, the relief would be a determination by the court that the debt was discharged. In fact, although frequently overlooked, the correct title of an action brought under § 523 is an action to determine the dischargeability of a debt. See 11 U.S.C. § 523(c) and Bankruptcy Rule 4007.

Once understood, it becomes obvious that reopening a case to allow amendment of schedules is futile. The debt in question was either discharged or excepted from discharge based on an analysis of § 523. Subsequent actions by the debtor cannot affect whether or not the debt has already been discharged. The correct procedure is to file a complaint to determine the dischargeability of the debt. See Samuel v. Baitcher (In re Baitcher), 781 F.2d 1529 (11th Cir.1986).

The explicit statutory provision governing situations like this one is § 523(a)(3)(A), not § 350(b). Section 523(a)(3)(A) provides for exceptions from discharge for certain debts that were:

neither listed nor scheduled . . . in time to permit . . . timely filing of a proof of claim, unless such creditor had notice or actual knowledge of the case in time for such timely filing. . . . ⁵

Certainly this language raises difficult questions regarding what being listed or scheduled means and what timely notice or actual knowledge means in a case like this one where no claim filing period was set and the case resulted in no distribution to creditors. Those difficult issues are being decided in the context of the adversary proceeding that has...