In re Williams

• Decision Date: 12 March 2003
• Docket Number: No. 99-34582.,No. 99-34580.,99-34580.,99-34582.
• Citation: 291 B.R. 445
• Parties: In re Robert Earl WILLIAMS d/b/a Williams Bilt Homes f/d/b/a Williams Builders, Debtor. In re Charlie Williams d/b/a Williams Bilt Homes f/d/b/a Williams Builders, Debtor.
• Court: U.S. Bankruptcy Court — Eastern District of Tennessee

Page 445

291 B.R. 445

In re Robert Earl WILLIAMS d/b/a Williams Bilt Homes f/d/b/a Williams Builders, Debtor.

In re Charlie Williams d/b/a Williams Bilt Homes f/d/b/a Williams Builders, Debtor.

No. 99-34580.

No. 99-34582.

United States Bankruptcy Court, E.D. Tennessee.

March 12, 2003.

Richard M. Mayer, Esq., Knoxville, TN, for Debtors.

Bailey, Roberts & Bailey, P.L.L.C., N. David Roberts, Jr., Esq., Knoxville, TN, Chapter 7 Trustee.

Richard F. Clippard, Esq., United States Trustee, Patricia C. Foster, Esq., Knoxville, TN, for United States Trustee.

MEMORANDUM ON MOTIONS TO REOPEN CASES

RICHARD S. STAIR, Jr., Bankruptcy Judge.

This matter is before the court upon the Motion to Re-Open Case filed by the Debtors on February 24, 2003, in each of the above bankruptcy cases. Each motion seeks an order reopening the bankruptcy case to add Susan C. Hunt, a creditor not originally listed on the schedules filed by the Debtors. Because debtors attorneys frequently file motions seeking to reopen closed no-asset cases for the purpose of adding creditors omitted from the original schedules, the court has decided, sua sponte, through this Memorandum to provide guidance on this practice.

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

I

On November 9, 1999, Robert Earl Williams, d/b/a Williams Bilt Homes, f/d/b/a Williams Builders, filed a Voluntary Petition initiating Bankruptcy Case No 99-34580 under Chapter 7 of the Bankruptcy Code. N. David Roberts, Jr., was duly appointed trustee, and pursuant to his duties as trustee, he filed a Trustee's Report of No Distribution and Abandonment of Property on December 14, 1999. The Debtor was granted his discharge on February 29, 2000. On April 12, 2000, the court entered a Final Decree discharging the trustee from his duties and closing the Debtor's bankruptcy case.

On November 9, 1999, Charlie Williams, d/b/a Williams Bilt Homes, f/d/b/a Williams Builders, filed a Voluntary Petition initiating Bankruptcy Case No. 99-34582 under Chapter 7 of the Bankruptcy Code. Mr. Roberts was again duly appointed trustee and on December 14, 1999, he filed a Trustee's Report of No Distribution and Abandonment of Property in this related bankruptcy case. The Debtor was granted his discharge on March 3, 2000, and a Final Decree was entered on April 12, 2000, again discharging Mr. Roberts of his duties as Chapter 7 trustee and closing the Debtor's bankruptcy case.

On February 24, 2003, the Debtors each filed a Motion to Re-Open Case seeking to add an "inadvertently omitted" creditor, Susan C. Hunt. Attached to each motion is a copy of a Motion for Default filed February 7, 2003, in a case styled Susan C. Hunt v. Williamsbilt Homes, a Partnership, and Charlie R. Williams, and Robert E. Williams, Individually, Case No. 1-312-02, pending in the Circuit Court for Knox County, Tennessee (the Knox County Circuit Court Lawsuit).¹ The Debtors allege in their motions that Ms. Hunt has been advised to stop the Knox County Circuit Court Lawsuit, pursuant to the Debtors' bankruptcy discharges, but that the litigation has continued.

II

Discharge of a debtor accomplishes the key goal of the Bankruptcy Code by enabling "honest but unfortunate" debtors to obtain relief from their debts in order to commence "a fresh start." 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)); see also Meyers v. Internal Revenue Serv. (In re Meyers), 196 F.3d 622, 624 (6th Cir.1999). In Chapter 7 cases, in exchange for a liquidation of assets for the benefits of creditors, debtors' debts, or a portion thereof, are discharged. Krohn, 886 F.2d at 125. Debts are not extinguished by a Chapter 7 discharge, but a discharged debtor is no longer personally liable for the debts. Houston v. Edgeworth (In re Edgeworth), 993 F.2d 51, 53 (5th Cir.1993).

Generally, 11 U.S.C.A. § 727 (West 1993) grants a Chapter 7 debtor an all-inclusive discharge of any prepetition debts. Specifically, as it relates to obtaining a discharge under Chapter 7, the Bankruptcy Code provides, in material part, as follows:

(a) The court shall grant the debtor a discharge, unless —

(1) the debtor is not an individual;

(2) the debtor, with intent to hinder, delay, or defraud a creditor or an officer of the estate charged with custody of property under this title, has transferred, removed, destroyed, mutilated, or concealed, or has permitted to be transferred, removed, destroyed, mutilated, or concealed —

(A) property of the debtor, within one year before the date of the filing of the petition; or (B) property of the estate, after the date of the filing of the petition;

(3) the debtor has concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information, including books, documents, records, and papers, from which the debtor's financial condition or business transactions might be ascertained, unless such act or failure to act was justified under all of the circumstances of the case;

(4) the debtor knowingly and fraudulently, in or in connection with the case —

(A) made a false oath or account;

(B) presented or used a false claim;

(C) gave, offered, received, or attempted to obtain money, property, or advantage, or a promise of money, property, or advantage, for acting or forbearing to act; or

(D) withheld from an officer of the estate entitled to possession under this title, any recorded information, including books, documents, records, and papers, relating to the debtor's property or financial affairs;

(5) the debtor has failed to explain satisfactorily, before determination of denial of discharge under this paragraph, any loss of assets or deficiency of assets to meet the debtor's liabilities;

(6) the debtor has refused, in the case —

(A) to obey any lawful order of the court, other than an order to respond to a material question or to testify;

(B) on the ground of privilege against self-incrimination, to respond to a material question approved by the court or to testify, after the debtor has been granted immunity with respect to the matter concerning which such privilege was invoked; or

(C) on a ground other than the properly invoked privilege against self-incrimination, to respond to a material question approved by the court or to testify;

(7) the debtor has committed any act specified in paragraph (2), (3), (4), (5), or (6) of this subsection, on or within one year before the date of the filing of the petition, or during the case, in connection with another case under this title or under the Bankruptcy Act, concerning an insider;

(8) the debtor has been granted a discharge under this section, under section 1141 of this title, or under section 14, 371, or 476 of the Bankruptcy Act, in a case commenced within six years before the date of the filing of the petition;

(9) the debtor has been granted a discharge under section 1228 or 1328 of this title, or under section 660 or 661 of the Bankruptcy Act, in a case commenced within six years before the date of the filing of the petition, unless payments under the plan in such case totaled at least —

(A) 100 percent of the allowed unsecured claims in such case; or

(B)(i) 70 percent of such claims; and

(ii) the plan was proposed by the debtor in good faith, and was the debtor's best effort; or

(10) the court approves a written waiver of discharge executed by the debtor after the order for relief under this chapter.

(b) Except as provided in section 523 of this title, a discharge under subsection (a) of this section discharges the debtor from all debts that arose before the date of the order for relief under this chapter, and any liability on a claim that is determined under section 502 of this title as if such claim had arisen before the commencement of the case, whether or not a proof of claim based on any such debt or liability is filed under section 501 of this title, and whether or not a claim based on any such debt or liability is allowed under section 502 of this title.²

(c)(1) The trustee, a creditor, or the United States trustee may object to the granting of a discharge under subsection (a) of this section.

(2) On request of a party in interest, the court may order the trustee to examine the acts and conduct of the debtor to determine whether a ground exists for denial of discharge.

11 U.S.C.A. § 727 (emphasis added).³

As provided for by § 727(c)(1) and (2), a Chapter 7 trustee, the United States Trustee, or any creditor may file an adversary proceeding objecting to a Chapter 7 debtor's general discharge for one of the grounds of § 727(a)(1) through (10). The party objecting to discharge must file a complaint initiating the adversary proceeding "no later than 60 days after the first date set for the meeting of creditors under § 341(a)." FED. R. BANKR. P. 4004(a); see also FED. R. BANKR. P. 4004(d) ("A proceeding commenced by a complaint objecting to discharge is governed by Part VII of these rules."); FED. R. BANKR. P. 7001(4) ("An adversary proceeding is governed by the rules of this Part VII. The following are adversary proceedings: ... (4) a proceeding to object to or revoke a discharge[.]").

Along those lines, Federal Rule of Bankruptcy Procedure 4004(c) provides in pertinent part:

(1) In a chapter 7 case, on expiration of the time fixed for filing a complaint objecting to discharge ... the court shall forthwith grant the discharge unless:

(A) the debtor is not an individual,

(B) a complaint objecting to the discharge has been filed,

(C) the debtor has filed a waiver under § 727(a)(10),

(D) a motion to dismiss the case under Rule 1017(e) is pending,

(E) a motion to extend the time for filing a complaint objecting to discharge is pending,

(F) a motion to extend the time for filing a motion to dismiss the case under Rule 1017(e) is pending, or

(G) the debtor has not paid in full the filing fee prescribed by 28 U.S.C. § 1930(a)...