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The Security National Bank of Sioux City, IA v. Vera T. Welte Testamentary Trust

Summarizing by Amir Shachmurove


Case Type:
Case Status:
AZ-22-1053-LBF (9th Circuit, Oct 17,2022) Not Published
The decision has no precedential value and is not recommended for publication. The B.A.P. for the Ninth Circuit ruled that the bankruptcy court for the District of Arizona did not abuse its discretion denying a creditor's motions to extend the bar date, motion to dismiss, and motion for relief from stay, nor did it abuse its discretion reinstating Debtor's discharge.
Procedural context:
The B.A.P. for the Ninth Circuit considered four grounds raised by the appellant Creditor: 1) denying of Creditor's § 523(c) motion to excuse deadline for filing a nondischargeability complaint pursuant Rule 4007(c), 2) granting Debtor's Rule 4004(c)(1)(E) motion to reinstate discharge, 3) denying Creditor's §§707(a) and (b) motion to dismiss case, and 4) denying Creditor's § 362(c)(2)(C) motion for relief from stay. The standard of review for each denial was de novo as to law and abuse of discretion as to the court's rulings. First, the B.A.P. followed the Ninth Circuit's standard that extending the deadline to file a nondischaregability complaint for a creditor with actual knowledge of the bankruptcy proceeding requires the creditor to show "unique or extraordinary circumstances" justifying an extension under Rules 4007(c) or 4004(b) according to the Ninth Circuit's authority in Wilzig v. Lopez (In re Lopez), 192 B.R. 539, 543 (9th Cir. BAP 1996) that places an "an affirmative duty on creditors to protect their claims." The rule of actual knowledge applies regardless if the creditor received any formal notice. Ordinarily, Ninth Circuit authority under Anwar v. Johnson, 720 F.3d 1183, 1186 (9th Cir. 2013) gives a bankruptcy court no discretion under Rule 4007(c) to retroactively extend the deadline for objection to discharge. While "unique or extraordinary circumstances" can include when the court itself gives ambiguous or confusing notices regarding a 341 meeting or bar dates, the Ninth Circuit B.A.P. in this case declined to expand that language to include the specific errors by the Trustee, such as failing to give notice of the third 341 meeting. Next, the B.A.P. concluded that the Debtor met the requirements for receiving discharge, and Creditor had no basis to contend otherwise. Further, the B.A.P. addressed arguments regarding Creditor's motion to dismiss for Debtor's failure to attend the 341 meeting twice. The B.A.P. notes that §§ 707(a) and (b) are discretionary for a bankruptcy court and, even if granted, a motion to dismiss would not provide the creditor relief by automatically revoke discharge. Finally, the B.A.P. found the motion for relief from stay moot because the Debtor's discharge terminated the stay.
In the Bankruptcy Court in the District of Arizona, Debtor in an individual Chapter 7 filed a petition with Creditor on Schedule F. The Trustee scheduled a 341 meeting, and Creditor attended. Debtor failed to attend the first 341 meeting because the court dismissed her case for failing to pay a filing fee. Debtor reopened her case and got a new date for her second 341 meeting. When Debtor failed to attend the second 341 meeting, Trustee told Creditor he would seek a dismissal based on Debtor's failure to appear. Trustee did not seek a motion to dismiss after finding out that Debtor missed her second 341 meeting due to Covid. Instead, Trustee scheduled a third 341 meeting but failed to notify Creditor. After the third 341 meeting that Creditor failed to attend, Trustee filed his Report of No Distribution. The court closed Debtor's case without discharge pending Debtor's filing of her Financial Management Course Certificate, which the court gave Creditor notice of. he Debtor obtained discharge, and the bankruptcy court for the District of Arizona closed her case without Creditor filing an objection to discharge under § 523(c). Creditor filed a motion to reopen the case, which the court granted. Creditor also filed several motions seeking relief from stay, extension of the deadline to file an objection to discharge, and dismissal of the Debtor's bankruptcy case. The court denied all of these motions. Creditor appealed to the B.A.P. for the Ninth Circuit, arguing that the bankruptcy court abused its discretion.
Lafferty, Brand, and Faris

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