In re Jenkins, 03-34736.

• Decision Date: 16 August 2005
• Docket Number: No. 03-34736.,03-34736.
• Citation: 330 B.R. 625
• Parties: In re Guy Ransom JENKINS, II, Debtor.
• Court: U.S. Bankruptcy Court — Eastern District of Tennessee

330 B.R. 625

In re Guy Ransom JENKINS, II, Debtor.

No. 03-34736.

United States Bankruptcy Court, E.D. Tennessee.

August 16, 2005.

COPYRIGHT MATERIAL OMITTED

Law Office of Herbert S. Moncier, David S. Wigler, Esq., Knoxville, TN, for Movant, Verna Wood.

Angela R. Morelock, Esq., Knoxville, TN, for the Debtor.

MEMORANDUM ON MOTIONS TO RE-OPEN BANKRUPTCY CASE TO PERMIT FILING OF MOTION TO MODIFY OR AMEND THE ORDER OF DISCHARGE AND FOR RELIEF FROM THE DISCHARGE INJUNCTION

RICHARD STAIR, JR., Bankruptcy Judge.

This contested matter is before the court on the Motion to Modify or Amend the Order of Discharge and for Relief from the Discharge Injunction and on the Motion to Re-Open Bankruptcy Case to Permit Filing of Motion to Modify or Amend the Order of Discharge and for Relief from the Discharge Injunction (collectively, Motions) filed by Verna Wood on July 8, 2005. Succinctly stated, the relief sought by Ms. Wood is that she be allowed to file a complaint against the Debtor for conversion in the Circuit Court for Knox County, Tennessee. The court set the Motions for hearing on August 11, 2005. Neither the Debtor nor his counsel appeared or otherwise opposed the Motions. The court nevertheless denied Ms. Wood's Motions, and files this Memorandum to clarify the legal issues involved. For the purposes of this Memorandum, and because the Debtor has not appeared in opposition to the Motions, the court deems the averments therein to be admitted.

This is a core proceeding. 28 U.S.C.A. § 157(b)(2)(B) (West 1993).

I

In August 2002, Ms. Wood was the owner of a 40-foot Holiday Mansion houseboat that she docked at Volunteer Marina in Knox County, Tennessee. On August 24, 2002, the Debtor and Robert Toole falsely represented to persons at the Marina that the Debtor was Ms. Wood's grandson and that Mr. Toole was a prospective purchaser of the houseboat, and that they had Ms. Wood's permission to take the houseboat. After taking the houseboat from the Marina, the Debtor and Mr. Toole damaged its engines and drive components. Additionally, after causing this extensive mechanical damage to the houseboat, the Debtor and Mr. Toole cause it to collide with the Marina, resulting in extensive structural damage.

The Debtor filed the Voluntary Petition commencing his Chapter 7 bankruptcy case on August 25, 2003, and he received a discharge on January 5, 2004. The Debtor did not list Ms. Wood as a creditor in his bankruptcy statements and schedules, nor did he provide her with notice of his bankruptcy case. On July 8, 2005, Ms. Wood filed her Motions, asking the court to reopen the Debtor's case so that she could obtain "an order modifying the Debtor's discharge" and a modification of the discharge injunction to allow her to file a lawsuit for conversion against the Debtor in the Circuit Court for Knox County, Tennessee.¹

II

The court derives its authority to reopen a closed bankruptcy case from 11 U.S.C.A. § 350(b), which provides that "[a] case may be reopened in the court in which such case was closed to administer assets, to accord relief to the debtor, or for other cause." 11 U.S.C.A. § 350(b) (West 2004). The decision to re-open a case is within the sound discretion of the judge. See Rosinski v. Boyd (In re Rosinski), 759 F.2d 539, 540-41 (6th Cir.1985). In making its determination, the court "must strike a balance between the rights of [the affected] creditors on the one hand and the policy of the fresh start afforded to Debtor by operation of Chapter 7 of the Bankruptcy Code." In re Frasier, 294 B.R. 362, 366 (Bankr.D.Colo.2003).

Because the statute does not define "cause" for reopening a closed case, motions to reopen are decided on a case by case basis, based upon the equities of each individual case. See In re Kapsin, 265 B.R. 778, 779-80 (Bankr.N.D.Ohio 2001). Nevertheless, courts do not reopen cases if doing so would be futile. In re Phillips, 288 B.R. 585, 587 (Bankr.M.D.Ga.2002); accord Chanute Prod. Credit Assoc. v. Schicke (In re Schicke), 290 B.R. 792, 798 (10th Cir. BAP 2003) ("A bankruptcy court that refuses to reopen a Chapter 7 case that has been closed will not abuse its discretion if it cannot afford the moving party any relief in the reopened case.").

Here, Ms. Wood's Motions will be denied because it is not necessary for the court to reopen the Debtor's case in order for her to obtain the requested relief. One of the primary goals of the Bankruptcy Code is to relieve an honest but unfortunate debtor of his indebtedness so that he may make a fresh start. In re Williams, 291 B.R. 445, 446 (Bankr.E.D.Tenn.2003) (quoting In re Krohn, 886 F.2d 123, 125 (6th Cir.1989)) (citing Local Loan Co. v. Hunt, 292 U.S. 234, 54 S.Ct. 695, 699, 78 L.Ed. 1230 (1934)). This is accomplished through discharge. Williams, 291 B.R. at 446 ("A discharge in bankruptcy does not extinguish the debt itself, but merely releases the debtor from personal liability for the debt.") (quoting Houston v. Edgeworth (In re Edgeworth), 993 F.2d 51, 53 (5th Cir.1993)). In a Chapter 7 case, once a discharge is granted, the debtor is no longer liable for any pre-petition debts "[e]xcept as provided in section 523 of this title[.]" 11 U.S.C.A. § 727(b) (West 2004).

Once a discharge order is entered, the "discharge injunction" attaches. In other words, the discharge itself "operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, ... [.]" 11 U.S.C.A. § 524(a)(2) (West 2004). By virtue of this permanent injunction, creditors may not attempt to collect a discharged pre-petition debt. See In re Leonard, 307 B.R. 611, 613 (Bankr.E.D.Tenn.2004) ("Section 524(a) was designed to `ensure that once a debt is discharged, the debtor will not be pressured in any way to repay it.'") (quoting Stoneking v. Histed (In re Stoneking), 222 B.R. 650, 652 (Bankr.M.D.Fla.1998)) (quoting H.R. REP., No. 595, 95th Cong., 1st Sess. 364 (1977)).

Nevertheless, "[t]he discharge injunction applies only to dischargeable debts." Payne v. United States (In re Payne), 306 B.R. 230, 233 (Bankr.N.D.Ill.2004). Since "the protections offered under § 524(a) are dependent upon an application of § 727(b) to identify those debts that are actually discharged and thus subject to the 524(a) protections. ... for so long as there remains a possibility that a particular debt could be declared non-dischargeable under the provisions of § 523, the permanent applicability of the § 524(a) protections to such debt cannot be determined." In re Schultz, 251 B.R. 823, 830 (Bankr.E.D.Tex.2000).

The bankruptcy court does possess the authority to modify the discharge injunction. See, e.g., Hendrix v. Page (In re Hendrix), 986 F.2d195, 198 (7th Cir.1993) ("[A]lthough the Bankruptcy Code does not expressly authorize the modification of a discharge, ... any court that issues an injunction can modify it for good cause on the motion of a person adversely affected by it."); Schultz, 251 B.R. at 826-27 ("[A] bankruptcy court's ability to modify the § 524 injunction is consistent with the Code's policy of maintaining control over the bankruptcy discharge and avoiding misinterpretation and abuse in other courts."). "Determining whether relief from the permanent injunction is warranted under appropriate circumstances should be analyzed pursuant to a cause standard." In re Fucilo, No. 00-36261, 2002 WL 1008935, at *9, 2002 Bankr.LEXIS 475, at *26 (Bankr.S.D.N.Y. Jan.24, 2002).

[The] framework for determining whether cause exists, thereby requiring a court to examine certain factors, includ[es] (1) whether relief would result in partial or complete resolution of the issues, (2) the lack of any connection to or interference with the bankruptcy case, (3) whether a specialized tribunal with the necessary expertise has been established to hear the cause of action, (4) whether the litigation would prejudice the interests of other creditors [,] (5) the interests of judicial economy and expeditious and economical resolution of the litigation, (6) whether the parties are ready for trial in the other proceeding, and (7) the impact of the stay on the parties and balance of harms.

Fucilo, 2002 WL 1008935, at *9, 2002 Bankr.LEXIS 475, at *27.

In this case, however, there is no need for Ms. Wood to obtain relief from the discharge injunction, because she was not listed as a creditor, and she had no notice of the bankruptcy case that would allow her to timely file a complaint requesting a determination of nondischargeability. Therefore, under § 523(a)(3)(B) and (c)(1), she can file a complaint at any time to determine nondischargeability. See In re Candidus, 327 B.R. 112, 117-18 (E.D.N.Y.2005) ("[Because] it cannot be assumed that a particular debt is excepted under § 523(a)(3)(B) from a general discharge ... a judicial determination in the nature of a declaratory judgment determining the dischargeability of the debt is required."). The dischargeability of debts is governed by 11 U.S.C.A. § 523, which provides, in material part:

(a) A discharge under section 727, ... of this title does not discharge an individual debtor from any debt —

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(3) neither listed nor scheduled under section 521(1) of this title, with the name, if known to the debtor, of the creditor to whom such debt is owed, in time to permit —

....

(B) if such debt is of a kind specified in paragraph (2), (4), or (6) of this subsection, timely filing of a proof of claim and timely request for a determination of dischargeability of such debt under one of such paragraphs, unless such creditor had notice or actual knowledge of the case in time for such timely filing and request; [or]

....

(6) for willful and malicious injury by the debtor to another entity or to the property of another entity[.]

....

(c)(1) Except as provided ..., the debtor shall be discharged from a debt of a kind specified in...