Hathorn v. Petty (In re Petty)

8th Cir. BAP, Case No. 13-6002 (May 8, 2013)
REVERSED. The 8th Circuit BAP reversed the decision of Bankrupcy Court (W.D. Ark - Fayetteville) after the Bankruptcy Court dismissed creditors' 523(a)(6) complaint as being untimely. The BAP ruled that because debtor did not notify creditors of the bankruptcy or the deadline to object to dischargeabiilty, and because creditors only had six days of actual notice of the bankruptcy and the dischargeability deadline, pursuant to 11 U.S.C. 523(a)(3), creditors complaint was not time barred when filed 64 days after the dischargeability deadline. The BAP ruled that because a claim asserted under 11 U.S.C. 523(a)(3) has no time bar, the issue was whether creditors' six days of actual notice was sufficient time to file a dischargeability complaint. Under 523(a)(3), a claim under 523(a)(2),(4), or (6) is only time barred if creditor had "notice or actual knowledge of the case in time" for the timely filing of a dischargeabilty complaint. Citing decisions on similarly limited time periods, the BAP agreed with the Bankruptcy Court that six days was insufficient time. The BAP reversed the Bankruptcy Court on the basis of the Bankruptcy Court's finding that after receiving actual notice, creditors wait of 64 days to file the complaint was untimely. The BAP concluded that once 523(a)(3) was satisfied, creditors had no time limitation for when they could file their dischargeability complaint. Consequently, the BAP reversed the order of dismissal and remanded to allow creditors to proceed with their 523(a)(6) claim.
Procedural context:
Appeal from Order of the U.S. Bankruptcy Court for the Western District of Arkansas dismissing creditors' 523(a)(6) and (a)(3) complaint as being untimely.
Debtors filed a case under Chapter 7 in the U.S. Bankruptcy Court for the Western District of Arkansas. Prior to filing, two creditors ("Creditors") filed a complaint in state court asserting various claims, including intentional torts. Debtors failed to include Creditors in mailing matrix or schedule Creditors' claim. Debtors subsequently amended schedules and updated matrix, but again omitted Creditors. After the deadline for objecting to the dischargeability of debts passed, Debtors amended their schedules and matrix again, listing Creditors and their attorney for the first time. Six days prior to the expiration of the deadline for objecting to dischargeability, however, Creditors' attorney received an email with notice of the bankruptcy and the dischargeability deadline. Creditors' attorney forwarded the notice to Creditors the same day. Creditors filed a complaint objecting to dischargeability sixty four days after the dischargeability deadline.
8th Cir. BAP Panel Judges Saladino, Kressel, and Shodeen (Opinion by Thomas L. Saladino)

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