Filed: Mar. 11, 1996
Latest Update: Mar. 02, 2020
Summary: Opinions of the United 1996 Decisions States Court of Appeals for the Third Circuit 3-11-1996 Judd v. Wolfe Precedential or Non-Precedential: Docket 95-5141 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1996 Recommended Citation "Judd v. Wolfe" (1996). 1996 Decisions. Paper 213. http://digitalcommons.law.villanova.edu/thirdcircuit_1996/213 This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for
Summary: Opinions of the United 1996 Decisions States Court of Appeals for the Third Circuit 3-11-1996 Judd v. Wolfe Precedential or Non-Precedential: Docket 95-5141 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1996 Recommended Citation "Judd v. Wolfe" (1996). 1996 Decisions. Paper 213. http://digitalcommons.law.villanova.edu/thirdcircuit_1996/213 This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for ..
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Opinions of the United
1996 Decisions States Court of Appeals
for the Third Circuit
3-11-1996
Judd v. Wolfe
Precedential or Non-Precedential:
Docket 95-5141
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1996
Recommended Citation
"Judd v. Wolfe" (1996). 1996 Decisions. Paper 213.
http://digitalcommons.law.villanova.edu/thirdcircuit_1996/213
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 95-5141
___________
SUSAN JUDD,
Appellant
vs.
LAWRENCE WOLFE
SUSAN JUDD,
Debtor
___________
Appeal from the United States District Court
for the District of New Jersey
(D.C. Civ. No. 94-cv-05574)
___________
Argued
January 25, 1996
Before: STAPLETON, MANSMANN and LEWIS, Circuit Judges.
(Filed March 11, 1996)
___________
Joseph M. Pinto, Esquire (ARGUED)
Joseph F. Polino, P.C.
Moorestown Times Square
720 East Main Street
Suite 1C
Moorestown, NJ 08057
COUNSEL FOR APPELLANT
George H. Hulse, Esquire (ARGUED)
Hulse & Germano
406 High Street
P.O. Box H
Burlington, NJ 08016
COUNSEL FOR APPELLEE
___________
OPINION OF THE COURT
1
__________
2
MANSMANN, Circuit Judge.
Debtor Susan Judd appeals from a decision of the
district court, affirming the bankruptcy court's denial of her
motion to reopen her bankruptcy case pursuant to 11 U.S.C.
§350(b). Judd sought to reopen her no-asset Chapter 7 bankruptcy
case for the sole purpose of amending her schedules to add a
creditor whose name had been omitted.
We are confronted with a question of first impression
for us: if a debtor, in a Chapter 7, no-asset, no-bar date
bankruptcy proceeding fails to list a claim on its schedule of
creditors and the bankruptcy case is closed, is the debt
nonetheless discharged pursuant to 11 U.S.C. §§ 727(b) and
523(a)(3), or must the debtor move the bankruptcy court, pursuant
to 11 U.S.C. § 350(b), for an order reopening the closed
proceeding to add the omitted creditor for the purpose of
discharging the claim?
We hold that in a no-asset, no-bar date case,
dischargeability is unaffected by scheduling. After a case is
closed, the debt in question was either discharged or excepted
from discharge based on sections 523 and 727(b). Therefore, the
filing of a motion to reopen is not necessary to discharge the
debt if the statutory exceptions to discharge do not apply.
3
I.0
Susan Judd and Lawrence Wolfe were married on December
27, 1985. They separated on January 15, 1990 and subsequently
were divorced on April 26, 1991.
After the parties separated, Judd remained in the
marital home. On December 24, 1990, pursuant to Article 2,
Paragraph 2.2 of the Property Settlement Agreement incorporated
into their Final Judgment of Divorce, Wolfe executed a quitclaim
deed which conveyed the marital home at 127 E. 7th Street,
Burlington, New Jersey, to Judd. Judd agreed to assume
responsibility to pay the outstanding mortgage and to indemnify
Wolfe in the event that he had to make any payments on the
mortgage.0 Judd continued to pay the monthly mortgage payments
on the home until February, 1993. On February 22, 1993,
financial circumstances caused Judd to file a Chapter 7 petition
in bankruptcy. Judd's Chapter 7 petition listed the home at 127
E. 7th Street as an asset on Schedule "A" of the petition, with a
fair market value of $93,000.00, subject to a secured claim of
$92,014.75. The first mortgagee on the property, Mortgage Access
Corporation, was listed under Schedule "D" of Judd's petition as
0
We recite the facts as Judd alleges them. It should be
understood, therefore, that our recitation does not constitute
findings.
0
Prior to the marriage, the marital home was owned by
Judd. Judd obtained the property through equitable distribution
in a prior divorce proceeding.
In December, 1989, Judd conveyed an equal interest in
the marital home to Wolfe. Upon this conveyance, the parties
refinanced the existing first mortgage, borrowing additional
money to consolidate debts and make home improvements. The
parties executed a note and a mortgage.
4
a secured creditor with a claim of $92,014.75. Due to the fact
that Wolfe was also obligated on the mortgage, this debt --listed
as a home mortgage -- was listed as a joint debt on Schedule "D"
of Judd's petition. Although her attorney listed the debt as a
joint debt on Schedule "D" of the bankruptcy petition, he did not
list Wolfe as a creditor or co-debtor. Because she had no other
assets available for distribution to her creditors in bankruptcy,
no bar date was set by the court establishing a deadline for
creditors to file proofs of claim.
On February 25, 1993, after reviewing Judd's Chapter 7
petition, the Bankruptcy Court Clerk, in accordance with the
applicable rules, notified the creditors listed in Judd's
schedules of the date set for the meeting of creditors and the
last day for the filing of complaints to determine the
dischargeability of debts pursuant to 11 U.S.C. § 523(c). In
accordance with Bankruptcy Rule 2002(e), no deadline for filing
claims was set; rather, creditors were notified that it was
unnecessary to file claims as there were no assets to distribute.
However, in accordance with Bankruptcy Rule 4007(c), a deadline
for filing complaints pursuant to 11 U.S.C. § 523(c) to determine
the dischargeability of certain debts was set. This deadline of
May 25, 1993, passed without any complaints being filed. On
April 29, 1993 the trustee abandoned his interest in the marital
home. On July 14, 1993, Judd received a Discharge in Bankruptcy.
On July 16, 1993, Judd's case was closed.
In March, 1994, after Judd's bankruptcy case was
closed, the first mortgagee, Mortgage Access Corporation, filed a
5
complaint in foreclosure listing both Judd and Wolfe as
defendants. Subsequently, Wolfe sought indemnification from Judd
pursuant to their property settlement.0 Accordingly, on August
15, 1994, Judd filed a motion to reopen her Chapter 7 proceedings
so that she could list Wolfe as a creditor and discharge her
obligation to him. In his August 31, 1994, opposition, Wolfe
alleged that he learned for the first time in July, 1994, that
Judd had filed for bankruptcy, that she had not paid the mortgage
for over one and one-half years, and that a complaint in
foreclosure had been filed. According to Wolfe, despite the
facts that Judd lives within a couple of miles of him, knows
where he lives, has been to his home, knows where he works and
knows his phone number, she never communicated anything to him
regarding either her failure to make mortgage payments since
January 1993 or the filing of the foreclosure suit.0
0
In July 1994, Wolfe filed a motion to enforce his
rights under the Judgment of Divorce and Property Settlement
Agreement in the Superior Court of New Jersey, Chancery Division,
Burlington County. Wolfe asked the court to: (1) order Judd to
satisfy the present mortgage arrearages for the former marital
residence; or alternatively, direct Judd to execute a quit claim
deed to the former marital residence in favor of Wolfe; (2)
direct Judd to reimburse Wolfe for all costs he had or would
incur with respect to the foreclosure of the property; (3) award
Wolfe the immediate right of possession; (4) award Wolfe counsel
fees; and (5) impose any other equitable relief the court deems
just. Judd opposed Wolfe's motion. The motion was granted and
the case is now pending before the Superior Court of New Jersey,
Appellate Division.
0
Upon obtaining all of this information, Wolfe contacted
the mortgage company, which agreed to reinstate the mortgage if
he cured the arrearages. He claimed he had the ability to obtain
a home equity loan on his existing home for this purpose, but
6
Wolfe opposed Judd's motion to reopen on the grounds of
unfair prejudice. Wolfe's primary concern was that his credit
worthiness would be harmed as a result of Judd's failure to pay
the mortgage. In addition, he was concerned that he would be
liable for any deficiency at a foreclosure sale. Wolfe opined
that if he had been listed as a creditor initially, he would have
received notice of the bankruptcy and could have taken steps at
that time to take over the property, pay the mortgage, avoid
additional interest and penalties and avoid any damage to his
credit.0
On September 12, 1994, finding that Wolfe had
demonstrated that he would be prejudiced by a reopening, the
bankruptcy court denied Judd's motion to reopen.0 The bankruptcy
would only do so if he owned Judd's residence, which he was
seeking in the state court action.
Wolfe estimated that the mortgage arrearages for the
property from January, 1993 to August 31, 1994, were over
$20,000. Wolfe stated further that there was no equity in the
property. The house was worth $96,000.00 with a principal
balance of $92,000.00, plus the $20,000 in arrearages.
0
Judd contended that she had given her attorney a copy
of the Divorce Judgment and Property Settlement Agreement,
quitclaim deed and mortgage payment slip, advising him that the
debt to Mortgage Access Corporation was a joint debt with Wolfe.
She asserted that she relied upon the expertise of her bankruptcy
counsel and that she was not aware of the fact that Wolfe had not
been listed as a creditor. In any event, she maintains the
failure to list Wolfe was not done maliciously, intentionally or
with an attempt to defraud or harm him.
0
The bankruptcy court found that:
Here, there is no question that prejudice has
been experienced by the potential creditor,
in terms of the growth of the balance due to
the mortgage company by the lack of
7
court subsequently denied Judd's motion for reconsideration filed
pursuant to Local Bankruptcy Rule 3(b) and F.R.B.P. 8002(b).0
On appeal to the United States District Court, the
court affirmed the bankruptcy court's order denying Judd's motion
to reopen. In its decision, the district court did not reach the
question of whether the debtor's obligations to Wolfe had been or
information provided to the creditor in this
obligation. She agreed to indemnify and hold
harmless her ex-husband on this obligation,
while he had availability to find out the
status, he had no obligation to continue to
review the status on an ongoing basis. On
the other hand, it was her obligation to
advise him, at least, that she would not be
able to indemnify him or that the obligation
was growing when she ceased payments in
January 1993 and then filed a bankruptcy
petition in '93, and I believe left the house
in January of '94 or February, perhaps.
I believe that there is insufficient basis to
reopen the Chapter 7 case, primarily because
the creditor has shown himself to be
prejudiced by such a reopening, and I will
deny the motion.
(JA 50-11 to 51-1).
0
Specifically, the bankruptcy court found:
And while you might say that accrual of
interest in and of itself is not the --
sufficient prejudice, is not the kind of
prejudice that would justify denying the
reopening and an adding of a creditor. We
looked at the global circumstances, if you
will, to conclude that indeed, he was
prejudiced, not only by the accrual of
interest but -- the foregoing of options and
by the negative impact on credit, that he
could have avoided at the time if he would have been proper named
in the ordinary course. . . . If he had the burden of proof to
show prejudice, he met that burden.
(JA 56-18 to 21).
8
should be discharged, after deciding that that question was not
properly before the court. (JA 41).
The district court had jurisdiction pursuant to 28
U.S.C. § 158(a)(1) and (c). We have jurisdiction pursuant to 28
U.S.C. § 158(d).
II.
We begin with an examination of the scope of the
discharge Judd received from the bankruptcy court. Section
727(b) of the Bankruptcy Code defines the scope of a Chapter 7
debtor's discharge: "Except as provided in section 523 of this
title, a discharge under subsection (a) of this section
discharged the debtor from all debts that arose before the date
of the order for relief under this chapter . . . ." 11 U.S.C.
§727(b). (Emphasis added.) As other courts have observed, "The
operative word in this section is `all.'" In re Beezley, 994
F.2d 1433, 1435 (9th Cir. 1993) (citing In re Mendiola,
99 B.R.
864, 865 (Bankr. N.D. Ill. 1989) (regarding § 727(b), a pre-
bankruptcy debt is discharged whether or not it is scheduled); In
re Stecklow,
144 B.R. 314, 317 (Bankr. D. Md. 1992) ("breadth of
the discharge" under section 727 is "comprehensive") and In re
Thibodeau, 136 B.R. 7, 8 (Bankr. D. Mass. 1992) ("§ 727(b) itself
makes no exception for unlisted debts")). Because section
727(b), on its face, does not create an exception for unlisted or
unscheduled debts, every prepetition debt is discharged under
section 727(b) subject to the provisions of section 523(a)(3). We
thus turn to section 523(a)(3).
9
Section 523(a)(3) creates two categories of unscheduled
debts: (1) those that are "of a kind specified in paragraphs
(2), (4), or (6) of this subsection," and (2) those that are not
of such kind.0 Those debts that are not of the kind specified in
paragraphs (2), (4), or (6) of section 523(a) are resolved by
reference to section 523(a)(3)(A).
Section 523(a)(3)(A) excepts from discharge certain
debts that were:
Neither listed nor scheduled . . . in time to
permit . . . timely filing of a proof of
claim, unless such creditor had notice or
actual knowledge of the case in time for such
timely filing . . . .
0
Section 523(a) provides in pertinent part:
(a)A discharge under
section 727 . . . of this title
does not discharge an individual
debtor from any debt--
(3)neither listed nor
scheduled . . . in time to permit--
(A)if such debt is not of
a kind specified in paragraph (2),
(4), or (6), of this subsection,
timely filing of a proof of claim,
unless such creditor had notice or
actual knowledge of the case in
time for such timely filing; or
(B)if such debt is a kind
specified in paragraph (2), (4), or
(6) of this subsection, timely
filing of a proof of claim and
timely request for a determination
of dischargeability of such debt
under one of such paragraphs,
unless such
creditor had notice or actual knowledge of the case in time for
such filing and request[.]
10
Because this is a "no-asset" Chapter 7 case, the time for filing
a claim has not, and never will, expire unless some exempt assets
are discovered; thus, section 523(a)(3)(A) cannot be applied in
Judd's circumstances. See Stone v. Caplan, 10 F.3d 285, 289,
n.13 (5th Cir. 1994) (observing that if no proof-of-claim
deadline has ever been set, section 523(a)(3)(A), by its own
terms, is inapplicable). Because section 523(a)(3)(A) does not
apply here, Judd's debt to Wolfe was discharged by operation of
law at the time of her discharge on July 14, 1993, unless her
debt to Wolfe falls under sections 523(a)(2), (4), or (6).
Debts listed in sections 523(a)(2), (4) and (6)
describe debts which arise from intentional torts such as fraud.
They include debts incurred by "false pretenses, false
representation or actual fraud . . . " (523(a)(2)); debts
incurred by "fraud or defalcation while acting as a fiduciary
. . ." (523(a)(4)); and debts "for willful and malicious injury
. . ." (523(a)(6)). Section 523(a)(3)(B) excepts from discharge
"intentional tort" debts that were not listed. Since section
523(c) provides that the dischargeability of these debts must be
determined by the bankruptcy court and Bankruptcy Rule 4007(c)
requires a complaint to be filed before the discharge is entered,
section 523(a)(3)(B) preserves the right of these creditors to
litigate the dischargeability of their debts.
For most creditors, the fundamental right enjoyed in
bankruptcy is the right to file a proof of claim because filing a
claim is obviously necessary in order to participate in the
11
distribution of the estate's assets.0 In re Stark, 717 F.2d 322
(7th Cir. 1983). Section 523(a)(3)(A) honors this right, by
excepting from discharge, debts owed to creditors who did not
know about the case in time to file a claim. In a case where
there are no assets to distribute, however, the right to file a
proof of claim is a hollow one.0 An omitted creditor who would
not have received anything even if he had been originally
scheduled, has not been harmed by omission from the bankrupt's
schedules and the lack of notice to file a proof of claim. Thus,
in a no-asset Chapter 7 case where no bar date has been set, we
conclude that there would be no purpose served by reopening a
0
For creditors holding intentional tort claims, the
right to file a proof of claim exists parallel to the creditor's
right to secure an adjudication of non-dischargeability.
Accordingly, section 523(a)(3)(B) excepts intentional tort debts
from discharge notwithstanding the creditor's failure to file a
timely complaint under section 523(c), if the creditor did not
know about the case in time to file such a complaint. 11 U.S.C.
§ 523(c). We do not understand Wolfe to be asserting such a
claim before us at this time.
As § 523(a)(3)(B) applies only when the omitted claim
is one which might have been excepted from discharge if the
creditor had the opportunity to timely file a complaint under
§523(a)(2), (4) or (6), and as Wolfe has conceded that he is not
asserting such a cause of action, § 523(a)(3)(B) is inapplicable.
0
In recognition of this, Bankruptcy Rule 2002(e) allows
a court to dispense with the necessity of filing proofs of claim
in a no-asset case. Bankruptcy Rule 2002(e) provides:
In a Chapter 7 liquidation case, if it
appears from the schedules that there are no
assets from which a dividend can be paid, the
notice of the meeting of creditors may
include a statement to that effect; that it
is unnecessary to file claims; and that if
sufficient assets become available for the
payment of a dividend, further notice will be
given for the filing of claims.
12
case to add an omitted creditor to the bankrupt's schedules. If
the debt at issue is not a debt described under section
523(a)(2), (4) or (6), the debt has been discharged by virtue of
section 727(b), whether or not it was listed. If, however, the
debt is a debt that falls under sections 523(a)(2), (4) or (6),
the debt is not discharged by virtue of section 523(a)(3)(B).
III.
Believing that reopening her case and amending her
schedules was necessary in order to discharge her debt to Wolfe,
Judd moved to reopen her case pursuant to section 350(b) of the
Bankruptcy Code. This section provides that a bankruptcy case
may be reopened ". . . to administer assets, to accord relief to
the debtor or for other cause". 11 U.S.C. § 350(b).
Apparently, both the debtor and the creditor here
labored under the misapprehension that the issue of whether
Wolfe's claim was or was not discharged would be resolved, either
explicitly or implicitly, by the court's decision on Judd's
motion to reopen pursuant to 11 U.S.C. § 350(b). It appears that
the bankruptcy judge also assumed that if Wolfe was not listed as
a creditor, his claim would not be subject to discharge. Because
we have concluded that the issue of whether Wolfe's claim under
the Property Settlement Agreement was or was not discharged,
notwithstanding its lack of scheduling, is resolved by sections
13
727(b) and 523(a)(3)(A) of the Bankruptcy Code, Judd's motion to
reopen was unnecessary.0
Our interpretation of sections 727(b) and 523(a)(3) is
consistent with that of the Court of Appeals for the Ninth
Circuit. In In re Beezley, 994 F.2d 1433 (9th Cir. 1994), the
debtor, Gilbert Beezley, appealed a decision affirming the
bankruptcy court's denial of his motion to reopen his bankruptcy
case pursuant to 11 U.S.C. § 350(b), arguing that the bankruptcy
court abused its discretion by failing to grant his motion to
reopen. Based upon the assumption that an amendment was
necessary to discharge a debt, Beezley sought to add an omitted
debt to his schedules. Beezley's case, like ours, was a no-
asset, no-bar date Chapter 7 case. The Court of Appeals
concluded that after such a case is closed, dischargeability is
unaffected by scheduling if the omitted debt is the type of debt
covered by 11 U.S.C. § 523(a)(3)(A), because it has already been
discharged pursuant to 11 U.S.C. § 727(b). The court noted as
well that if the debt is the type of debt covered by 11 U.S.C.
0
See In re Mendiola, 99 B.R. 864, 865 (Bankr. N.D. Ill.
1989) (reopening the case to amend schedules would not affect the
rights or liabilities of the parties, but would be an exercise in
futility); In re Karamitsos,
88 B.R. 122 (Bankr. S.D. Tex. 1988)
(the filing of an amended creditor schedule after discharge has
been granted in a no-asset Chapter 7 case has absolutely no
effect on the dischargeability of the debt); In re Guzman,
130
B.R. 489 (Bankr. W.D. Tex. 1991) (scheduling or not scheduling a
creditor has no impact on whether the creditor's claim is
discharged; § 727 extends discharge to all prepetition debts and
applies without regard to whether the debt is listed in the
schedules). Accord In re Thibodeau,
136 B.R. 7 (Bankr. D. Mass.
1992); In re Anderson,
72 B.R. 495 (Bankr. D. Minn. 1987); In re
Peacock,
139 B.R. 421 (Bankr. E.D. Mich. 1992).
14
§523(a)(3)(B), then it has not been discharged and is non-
dischargeable.0
In an attempt to evade Beezley's application to his
case, Wolfe argues that his case has substantial factual
differences from Beezley and the typical no asset case where the
unscheduled creditor has either a judgment, a liquidated money
claim or is a party to a consumer transaction with the debtor.
Rather here, observes Wolfe, the debtor and the creditor were
previously married, divorced, and the "claim" which the debtor is
attempting to discharge is an indemnification agreement for a
joint mortgage obligation incorporated into a Judgment of
Divorce. According to Wolfe, the relationship of the parties,
the nature of the underlying debt at issue and the debtor's
breach of the Property Settlement Agreement cry out for the
"equitable approach" adopted by other courts and not the strictly
mechanical approach of Beezley. See, e.g., Stark v. St. Mary's
Hospital, 717 F.2d 322 (7th Cir. 1983) (holding in a no-asset
bankruptcy case a debtor may reopen the estate to add an omitted
creditor where there is no evidence of fraud or intentional
design); Robinson v. Mann,
339 F.2d 547 (5th Cir. 1964) (noting
in exceptional circumstances, the bankruptcy court may exercise
its equitable discretion to allow amendment, considering the
0
In view, however, of allegations of fraud in the
transaction that gave rise to the underlying claim, the court did
not decide whether the particular debt at issue was discharged.
See In re Beezley, 994 F.2d at 1441. There, the creditor, Cal
Land, in a memorandum filed in opposition to Beezley's motion to
reopen, advised the court that it would seek to establish that
the debt was nondischargeable under section 523(a)(3)(B).
15
factors offered in justification of the failure to list the
creditor in question: the failure of counsel to have originally
listed the creditor, the degree of disruption which would result
from allowing the amendment, and whether any creditor including
the unlisted creditor would be prejudiced thereby); Stone v.
Caplan, 10 F.3d 285 (5th Cir. 1994) (allowing out-of-time
amendments if exceptional circumstances and equity require it).
Because these cases supplant the analysis required under section
727(b) and section 523 and substitute a test involving equitable
considerations completely foreign to these sections of the
Bankruptcy Code, we disagree.
We decline to hold that the issue here, whether Judd's
debt to Wolfe is discharged pursuant to sections 523(a)(3)(A) and
727(b), turns on whether the omission of Wolfe from Judd's
schedules was made in good faith, for the Bankruptcy Code does
not impose a requirement of good faith for the discharge of an
omitted debt in a no asset, no bar date case. "No where in
section 523(a)(3) is the reason why a debt was omitted from the
bankruptcy schedules made relevant to the discharge of that
debt." In Re Beezley, 944 F.2d at 1439. As the Court of Appeals
for the Ninth Circuit observed there, such a holding would
interpose "an equitable barrier between the debtor and his
discharge that Congress simply did not enact in the Bankruptcy
Code."
Id.
The plain language of section 523(a)(3) represents a
congressional policy choice. Clearly, Congress could have
exempted from the debtor's discharge, pursuant to sections 727(b)
16
and 523, debts that were omitted intentionally, rather than
merely inadvertently, from the debtor's schedules. Congress
chose not to do so. Unless Wolfe can show that his claim falls
under the statutory exceptions of section 523(a)(2), (4), or (6),
his debt has been discharged by operation of law. Wolfe has
declined to do so.
We review a bankruptcy court's refusal to reopen a
closed case pursuant to 11 U.S.C. § 350(b) for abuse of
discretion. Fourteenth Avenue Security Loan Ass'n v. Squire, 76
F.2d 799 (3d Cir. 1938); Matter of Gershenbaum,
598 F.2d 779 (3d
Cir. 1979). Having concluded that Judd's debt to Wolfe was
discharged by application of statute, we hold that the bankruptcy
court did not abuse its discretion in declining to reopen her
case.0
IV.
At oral argument, Judd further argued that although
amending her schedules at this juncture would not affect the
discharge of her debt to Wolfe, we should nonetheless remand this
case so that the bankruptcy court may reconsider whether or not
to reopen Judd's bankruptcy case for the limited purpose of
adding Wolfe's name to Judd's list of creditors. Judd asserts
that as a practical matter, it is important for her to have all
of her creditors listed so that her schedules accurately reflect
0
We note that the bankruptcy court's findings with
respect to any prejudice suffered by Wolfe are of no moment. The
type of prejudice alleged by Wolfe is legally irrelevant to
discharge pursuant to sections 727(b) and 523.
17
the discharge of her debts. Judd asserts that, as a condition of
acquiring new credit, prospective lenders may require that all
discharges appear on her schedules. Because section 350(b) of
the Bankruptcy Code permits the court to reopen a case "to accord
relief to the debtor, or for other cause", Judd's arguments may
have merit in this regard.
Here, we are unable to determine whether there may be
such cause to reopen this matter. In any event, this issue is
best addressed by the bankruptcy court in the first instance.
We note, however, that allowing Judd to list all of her
discharged creditors is in keeping with the practical
considerations pertinent to Chapter 7 debtors, and in keeping
with the primary purpose of the Bankruptcy Act of affording
debtors a fresh start. See, e.g., In re McKinnon, 165 B.R. 55
(Bankr. D. Maine, 1994) (maintaining the accuracy of a debtor's
schedules is sufficient cause to reopen a no-asset case). Not
only will amending Judd's schedules ensure the comprehensiveness
of her Chapter 7 discharge, making it easier for her to obtain
credit in the future, but amending her schedule to add Wolfe as a
creditor also ensures that if assets are later discovered, Wolfe
would receive notice to file a proof of claim, enabling him to
participate in any distribution of Judd's assets. See In re
Henson,
70 B.R. 363 (Bankr. N.D. Ill. 1987). These are
considerations which, we are confident, the bankruptcy court will
consider. We will thus vacate the district court's order and
remand this case to the district court for reference to the
bankruptcy court.
18
19
