In re Riggs
| Decision Date | 14 February 2023 |
| Docket Number | 22-30575 |
| Parties | In Re: Larry Riggs and Lynda Riggs, Debtors. |
| Court | U.S. Bankruptcy Court — Northern District of Ohio |
In Re: Larry Riggs and Lynda Riggs, Debtors.
No. 22-30575
United States Bankruptcy Court, N.D. Ohio, Western Division
February 14, 2023
Chapter 7
MEMORANDUM OF DECISION AND ORDER REGARDING CREDITOR'S MOTION FOR EXTENSION OF TIME TO OBJECT TO DISCHARGEABILITY OF DEBT AND DISCHARGE
John P. Gustafson, United States Bankruptcy Judge
This cause comes before the court on Creditor Kapitus Servicing, Inc.'s, as Servicing Agent of Kapitus, LLC, (the "Movant") Motion for Extension of Time to Object to Dischargeability of Debt and Discharge (the "Motion for Extension of Time") filed on August 15, 2022. [Doc. #30]. On August 19, 2022, Debtors Larry Riggs and Lynda Riggs (the "Debtors") filed an Objection to the Motion for Extension of Time (the "Objection"). [Doc. #33].
BACKGROUND
On April 22, 2022, the Debtors filed a voluntary petition for relief under Chapter 7 of the
Bankruptcy Code. [Doc. #1]. The Debtors filed their Schedules, list of creditors, and other required documents with the petition, scheduling the Movant as an unsecured creditor. [Id., p. 26, Schedule E/F: Creditors Who Have Unsecured Claims, Line 4.17].
On April 26, 2022, the Clerk issued a "Notice of Chapter 7 Bankruptcy Case - No Proof of Claim Deadline"[1] (the "Notice"). [Doc. #8]. On April 28, 2022, the Notice was mailed to the creditors listed by Debtors. [Doc. #11]. The Notice, which conformed with Official Form 309A, set forth certain information about the Debtors' case. For example, on the first page, the Notice sets forth the following information:
• "This notice has important information about the case for creditors, debtors, and trustees including information about the meeting of creditors and deadlines. Read both pages carefully." [Doc #8, p. 1](emphasis in original)
• "The debtors are seeking a discharge. Creditors who assert that the debtors are not entitled to a discharge of any debts or who want to have a particular debt excepted from discharge may be required to file a complaint in the bankruptcy clerk's office within the deadlines specified in this notice. (See line 9 for more information.)" [Id.].
On the second page, under the section entitled "Meeting of creditors," the Notice states:
• The First Meeting of Creditors "will be conducted remotely" on "June 16, 2022 at 9:30 AM." [Id., p. 2](emphasis in original).
The second page of the Notice, under the section entitled "Deadlines," also states:
• The "deadline to object to discharge or to challenge whether certain debts are dischargeable" is "8/15/22." [Id.](emphasis in original).
• "You must file a complaint:
o if you assert that the debtor is not entitled to receive a discharge of any debts under any of the subdivisions of 11 U.S.C. §727(a)(2) through (7), or
o if you want to have a debt excepted from discharge under 11 U.S.C. §523(a)(2), (4), or (6)." [Id.](emphasis in original).
The deadline for filing a complaint stated in the Notice was sixty days after the first date
set for the meeting of creditors. Therefore, the applicable filing deadline was in accordance with Rules 4004(a) and 4007(c) of the Federal Rules of Bankruptcy Procedure. The Notice also complied with 11 U.S.C. §523(c) and Federal Rules of Bankruptcy Procedure 7001(4) and (6).
On April 28, 2022, the Bankruptcy Noticing Center mailed the Notice to, among others, Kapitus, LLC, at the address scheduled by the Debtors and listed in the creditor matrix. [Doc. #11, p. 1]. The record reflects the Notice was not returned as undeliverable. [Id., p. 3].
On June 16, 2022, the Chapter 7 Trustee held the First Meeting of Creditors. [Doc. #30, ¶4]. The Notice provided the date for the First Meeting of Creditors. The Movant had knowledge of the date set for the First Meeting of Creditors because a representative of Movant attended telephonically.[2]
The Chapter 7 Trustee concluded the First Meeting of Creditors and requested additional documentation and certain information from the Debtors, which was subsequently provided. However, the Movant did not seek any information or documents from the Chapter 7 Trustee or from the Debtors themselves; nor does the record reflect that the formal procedural tools available to obtain information from a debtor, such as a Rule 2004 examination, were used by the Movant. The Movant did not contact Debtors' counsel, nor did the Debtors receive any written request from the Movant regarding the production of documents.
On August 12, 2022, three days before the deadline, counsel for the Movant was retained to represent Kapitus, LLC in this bankruptcy case. [Doc. #30, ¶18].
On August 15, 2022, the deadline for filing a complaint to deny discharge and/or to determine dischargeability under §§523(a)(2), (4), or (6), the Movant filed its timely Motion for Extension of Time. [Doc. #30]. The Debtors timely filed their Objection to the Motion for Extension of Time on August 19, 2022. [Doc. #33].
The Motion for Extension of Time asserts that the Movant retained counsel on August 12, 2022, and seeks another thirty days, through and including September 14, 2022, after the original August 15, 2022 filing deadline. [Doc. #30, ¶¶13, 18].
The Movant seeks an extension of time to file a dischargeability complaint under Rule 4007(c), pertaining to dischargeability complaints seeking to except particular debts from discharge. [Id., ¶¶13, 15]. The Movant primarily argues it is owed a debt for monies obtained by fraud, [Id., ¶24], asserting that this debt is nondischargeable under 11 U.S.C. §§523(a)(2)(A), (a)(4), and (a)(6). [Id., ¶¶21-23].
The Movant also seeks an extension of time to file a complaint objecting to discharge [Id., ¶¶16, 19] under Rule 4004(a). [Id., ¶15]. However, the Motion for Extension of Time does not state why an extension to file a complaint to deny discharge is warranted.
On September 8, 2022, this court held a hearing on the Movant's Motion for Extension of Time and Debtors' Objection to the Motion. Debtors' counsel and Movant's counsel appeared by telephone. Movant's counsel informed the court it only received the information to file a dischargeability complaint, or a complaint objecting to discharge, from Movant the evening of August 12, 2022. For this reason, Movant's counsel needed more time to review the relevant information, including the information regarding a state court breach of contract action in Virgina, to file a complaint that would comply with counsel's ethical obligations. When asked about the state court judgment, Movant's counsel informed the court the judgment was entered by default.
The court requested that a copy of the state court judgment be filed in the docket on, or before, September 16, 2022. The court further requested any additional responsive arguments to be filed on, or before, September 16, 2022. The court indicated the matter would be decisional after September 16, 2022. Movant did not file any responsive arguments.
On September 23, 2022, the Movant filed a copy of the state court judgment obtained in the Circuit Court of the City of Richmond, Virginia. [Doc. #37].
On September 27, 2022, the Movant filed a proof of claim. [Claim No. 16-1]. The amount claimed was $116,836.38.
On September 27, 2022, the Movant filed another proof of claim. [Claim No. 17-1]. The amount of the second proof of claim was $116,836.55.
On November 29, 2022, the Movant withdrew Claim No. 16-1, which stated the amount claimed was $116,836.38. [Doc. #39]. Proof of Claim 17-1 remains on the claims docket.
LAW AND ANALYSIS
A debtor generally qualifies for a discharge, which relieves the debtor from prepetition debts other than any debts excepted from discharge, if the conditions in §727(a) are satisfied. See, Kontrick v. Ryan, 540 U.S. 443, 447, 124 S.Ct. 906, 157 L.Ed.2d 867 (2004). However, the trustee, a creditor, or the United States trustee may oppose a debtor's discharge. See, §727(c)(1); Fed.R.Bankr.P. 4004(a). Additionally, a debtor or a creditor may file a complaint to determine the dischargeability of certain debts. See, §523(c)(1); Fed.R.Bankr.P. 4007(a); Brady v. McAllister (In re Brady), 101 F.3d 1165, 1169 (6th Cir. 1996)("Likewise, 11 U.S.C. §523(c)(1) allows creditors to request determinations regarding the dischargeability of certain debts."). The controlling time prescriptions for filing a complaint objecting to discharge or to determine dischargeability are left up to the Federal Rules of Bankruptcy Procedure. See, Kontrick, 540 U.S. at 448.
Rule 4004(a) states that: "a complaint objecting to the debtor's discharge under §727(a) of the Code shall be filed no later than 60 days after the first date set for the meeting of creditors under §341(a)." Rule 4004(b), governing extensions of the Rule 4004(a) filing deadline, generally provides the court "may" extend the time to object to discharge for "cause."
Similarly, Rule 4007(c) states that: "a complaint to determine the dischargeability of a debt under §523(c) shall be filed no later than 60 days...
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