Etihiri v. Kannter (In re Kanter)

Summarized by David Hercher , U.S. Bankruptcy Court, District of Oregon
10 years 4 months ago

Citation:

In re Kanter, No. CC-15-1059-DTaKu (9th Cir. B.A.P. Oct. 13, 2015).

Tag(s):

Ruling:

A debtor-defendant in a § 523(a)(2) action waives the defense of the untimeliness of the complaint by not raising it as an affirmative defense. Not-for-publication memorandum.

Procedural context:

The chapter 7 debtors filed their petition on February 21, 2012. The dischargeability deadline was May 25, 2012. The creditor later filed a complaint against the debtors in state court. In January 2013, the debtors reopened their bankruptcy case to amend their schedules to include the creditor’s claim, which they had previously omitted. The amended schedules were filed on February 25, 2013, and the bankruptcy case was reclosed. On July 1, 2013, the creditor filed a § 523(a)(2)(A) action against the debtors. The bankruptcy court entered a judgment dismissing all claims for relief in the creditor’s complaint, both as untimely and on the merits. On appeal, the B.A.P. affirmed.

Facts:

Under § 523(c)(1), the general dischargeability deadline is subject to the exception in § 523(a)(3)(B), which excepts from the deadline any claim neither listed nor scheduled in time to permit the timely filing of an action, “unless such creditor had notice or actual knowledge of the case in time for such timely filing and request.” The bankruptcy court held that the creditor had the burden to demonstrate that she lacked notice or knowledge in time to permit timely filing of her action. The debtors did not raise timeliness as an affirmative defense against the complaint. In dismissing the complaint on the failure of the creditor to offer evidence to support her entitlement to file her complaint under § 523(a)(3)(B), the bankruptcy court misallocated the burden of proof with respect to timeliness. The debtors waived the timeliness issue by not asserting it as an affirmative defense. But the error was harmless, because the creditor was not entitled to relief on the merits of her § 523 action.

Judge(s):

Randall L. Dunn, Laura S. Taylor, and Frank L. Kurtz, Bankruptcy Judges.

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