In re Paul, Bankruptcy No. 91-02932.

• Citation: 194 BR 381
• Decision Date: 24 October 1995
• Docket Number: Bankruptcy No. 91-02932.
• Court: United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — District of South Carolina
• Parties: In re Richard J. PAUL, Debtor.

194 B.R. 381 (1995)

In re Richard J. PAUL, Debtor.

Bankruptcy No. 91-02932.

United States Bankruptcy Court, D. South Carolina.

October 24, 1995.

Dana Wilkinson, Columbia, SC, for Debtor.

Michael M. Beal, Columbia, SC, for NationsBank.

ORDER DENYING MOTION TO REOPEN CASE

JOHN E. WAITES, Bankruptcy Judge.

THIS MATTER came before the Court on the motion of Richard J. Paul (the "Debtor") to reopen his case. The Motion to Reopen Case was filed on September 20, 1995. On October 5, 1995, NationsBank, National Association (Carolinas)'s ("NationsBank") filed its objection to the Debtor's Motion to Reopen Case.

Findings of Facts¹

1. On or about December 29, 1989, the Debtor signed a guarantee of payment regarding two loans between NationsBank and CPM Investors, a partnership of which the Debtor was a partner.

2. On or about May 13, 1991, the Debtor filed for relief pursuant to Chapter 11 of the United States Bankruptcy Code. The Debtor did not list NationsBank's claim relating to the guaranty of payment on his schedule of liabilities.

3. On or about July 29, 1993, the Debtor's bankruptcy case was closed.

4. On or about September 8, 1994, the Debtor was served with a complaint initiated by NationsBank in state court to foreclose on the property which was mortgaged by CPM Investors and to obtain a deficiency judgment against the partners and guarantors. These actions bear case numbers 94-CP-10429 and 94-CP-104130. The only matter remaining in these actions is a final ruling of the magistrate; a hearing has already occurred regarding these complaints.

5. On or about September 20, 1995, the Debtor filed his motion to reopen to allow him to amend his schedules in order to retroactively include NationsBank so that NationsBank's debt would be discharged.

Discussion and Conclusions of Law

Whether a bankruptcy court should reopen a case depends upon the circumstances of the individual case; this decision is committed to the court's discretion. Hawkins v. Landmark Finance Co., 727 F.2d 324, 326 (4th Cir.1984). "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. § 350(b).² In determining whether a bankruptcy case should be reopened, courts frequently review the following factors: (1) any prejudice to the creditor which would be affected by the reopening of the bankruptcy case and (2) whether the debtor intentionally omitted the creditor or whether the omission was part of a fraudulent scheme. Hawkins, 727 F.2d at 327; In re Gray, 57 B.R. 927, 930 (Bankr.D.R.I.1986).

In Hawkins, the debtor requested that the court reopen his bankruptcy case to allow for a lien avoidance action against Landmark. The Court of Appeals for the Fourth Circuit upheld the bankruptcy court's denial of the motion to reopen the case finding that the debtor failed to request a reopening of his case for over eight months, and only then, after a creditor had instituted a claim and delivery action. This delay constituted prejudice to the creditor due to the court costs and attorney fees incurred by the creditor in bringing the claim and delivery action. Hawkins, 727 F.2d at 327.

The Debtor's case was closed over two years ago and the Debtor did not seek to reopen his case until one year after NationsBank commenced its action against him. The court concludes that if the Motion to Reopen were granted, NationsBank would be prejudiced after investing time and resources in pursuing state court collection actions of this debt.

NationsBank would be further prejudiced due to the Debtor's treatment of unsecured creditors under his plan of reorganization. The Debtor filed his petition under Chapter 11 of the Bankruptcy Code. Pursuant to his plan of reorganization, the Debtor provided for no payments to the unsecured creditors. The provisions of Chapter 11 are established to allow the creditors to evaluate the feasibility of a debtor's plan of reorganization and to ensure that the creditors will receive no less in Chapter 11 than they would in a Chapter 7 liquidation. See § 1129. By reopening his case to include NationsBank, the Debtor is attempting to discharge NationsBank's debt while depriving NationsBank of its rights under the Bankruptcy Code. NationsBank would be prejudiced if the Debtor's bankruptcy case were reopened because the Debtor's plan provides for no distribution to unsecured creditors and NationsBank was not afforded the opportunity to be heard at confirmation.

The Debtor alleges that NationsBank had notice due to a NationsBank credit card debt which was scheduled by the Debtor. "Once a debtor receives a discharge, it is up to the creditor to show that he has not been duly scheduled, and the burden then shifts to the debtor to come forward with evidence that the creditor had notice or...