McDermott v. St. George (In re St. George)

Case Type:
Case Status:
Reversed and Remanded
File Name: 17b0002n.06; Nos. 16-8017-8018 (6th Circuit, Apr 17,2017) Not Published
Bankruptcy Appellate Panel (BAP) reversed the decision of the Bankruptcy Court which had (i) granted a second motion by the U.S. Trustee's Office (UST) to extend the time to file a complaint objecting to the debtor's discharge and (ii) granted the denial of the debtor's discharge after an evidentiary hearing. The BAP found that the UST failed to meet its burden to show cause for the additional extension.
Procedural context:
The Debtor filed a Chapter 7 bankruptcy. Following the adjourned meeting of creditors, the UST filed a motion to extend time to object to the debtor's discharge. The debtor did not oppose the extension and it was granted. Shortly after the motion was granted the Trustee concluded the meeting of creditors after the debtor produced requested documents. The UST then filed a motion for a Rule 2004 exam. The UST then filed a second request to extend time for the UST to file a complaint objecting to discharge. The Bankruptcy Court granted the Rule 2004 motion. Debtor objected to the second request and moved to vacate the Rule 2004 exam. The Bankruptcy Court denied the requested 75 day extension and gave the UST 10 days to file its complaint, which it did timely. The Court vacated the Rule 2004 order. The Bankruptcy Court denied the debtor's discharge and debtor appealed the granting of the second request and the denial of his discharge.
The meeting of creditors took 2.5 hours. The Trustee adjourned the meeting twice to get documents. The UST had one 75 day extension to file its complaint and then asked for an additional 75 days. The Bankruptcy Court was troubled by the lack of diligence of the UST but allowed it an additional 10 days for a second extension. The BAP found that the UST arrived late to the hearing on the second extension and offered no reason for the second extension. The UST's lack of diligence following the meeting of creditors, where it questioned the debtor extensively, was inexcusable. The BAP found an abuse of discretion on the part of the Bankruptcy Court as the UST had done nothing between the second extension request and the hearing. Once the Bankruptcy Court was reversed for granting the second extension, the judgment in favor of the UST on the merits did not matter and it was reversed as well.
Delk, Harrison and Preston

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