- No. 12-3701 (8th Cir. March 5, 2014).
- Finding no error in the bankruptcy court’s findings, the Eighth Circuit affirmed the bankruptcy court’s denial of reconsideration of an earlier order imposing sanctions on the appellent for seeking to collect a post-discharge debt from the debtor/appellee.
- Procedural context:
- Williams filed a motion for reconsideration of the bankruptcy court’s sanctions order, claiming that a collection action commenced by Williams after King’s bankruptcy filing sought only to enforce post-discharge indebtedness. The bankruptcy court denied the motion and sanctioned Williams, citing Williams’ inconsistent testimony over whether the debt was incurred pre- or post-discharge. Williams filed a second motion for rehearing alleging new theories of insufficient notice and excusable neglect, which the bankruptcy court also denied. The Bankruptcy Appellate Panel affirmed and Williams appealed.
- When King filed for chapter 13 bankruptcy protection in 2010. Although King had borrowed various sums from Williams in the preceding years, he did not list Williams as a creditor or list the debt owed to Williams as one for which he would seek discharge. After the case was converted to chapter 7, King and Williams entered into a new loan agreement incorporating both the pre-existing loan balances and providing for additional loans from Williams to King. King eventually reopened his case in March 2011 to add several creditors and debts (including Williams) to the list of debts to be disharged. In opposing the motion to reopen, Williams alleged that the pre-conversion debt had been incorporated into the new loan agreement. The bankruptcy court ruled that the post-bankruptcy loan agreement was ineffective to reaffirm the prepetition indebtedness, and granted the discharge. Thereafter, Williams filed a lawsuit in state court seeking to recover both the prepetition and postpetition indebtedness from King, resulting in the imposition of sanctions by the bankruptcy court following a motion by King. Observing that “the deference owed by appellate courts to findings of fact is at its highest where the issue turms on the resolution of a direct conflict between live witnesses, the Eighth Circuit affirmed the denial of Williams’ two motions for rehearing, deferring to the bankruptcy court’s determinations as to the credibility of the witnesses. Significantly, both the bankruptcy court and the appellate court emphasized that the post-discharge loan agreement, which met none of the requirements of § 524 nor had been submitted to the bankruptcy court for approval, was unenforceable to serve as a reaffirmation of pre-discharge indebtedness.
- Riley, Bye, and Gruender.
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