In re John Horton

Case Type:
Case Status:
WW-20-1069-LSF (9th Circuit, Sep 29,2020) Not Published
The bankruptcy court decision not to reopen the case was affirmed in full. The appellate court reviewed the decision not to reopen for an abuse of discretion and determined there was no such abuse, because the debtor fell well short of the standard to present clear and convincing evidence that the Department of Education (DOE) took any action to collect a debt that the DOE knew would violate the discharge injunction.
Procedural context:
The debtor filed a Chapter 7 bankruptcy in 1995. He received a discharge, and the case closed in 1996. The debtor later commenced an adversary proceeding to discharge student loans, which was resolved by stipulated judgment; the adversary proceeding was closed in 1997. In February 2020, the debtor sought to reopen his case and impose sanctions on the DOE for violating the discharge injunction, because the debtor's wages were garnished. The bankruptcy court denied the motion, because the debtor failed to present evidence that the garnishment occurred under the DOE's authority or for the discharged debt. The debtor appealed.
In early 2020, the debtor’s employer began garnishing his wages under an order listing the creditor agency as the U.S. Department of Treasury acting on behalf of the Department of Defense, Defense Finance and Accounting Service. The DOE filed a declaration that it was not the federal agency seeking to garnish the debtor’s wages. The DOE's declarant also confirmed the student loans under its authority were discharged under the stipulated judgment. The DOE attempted and failed to reach out to the issuing agency for more information. The bankruptcy court held a telephonic hearing on the debtor’s motion to reopen, and the debtor did not appear citing distance and a hearing impairment. The bankruptcy court denied the motion, because the stipulated judgment was not entered into the record. The debtor did not enter it into the record, and it was not available through the electronic system, at least in part due to the age of the adversary proceeding. The debtor also failed to show the garnishment occurred due to the student loan debt under the DOE’s authority, which the DOE acknowledged was discharged. Therefore, the bankruptcy court concluded there was no cause to reopen the bankruptcy case.
The Hons. Lafferty, Spraker, and Faris

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