Plaintiff-appellants, Alfonso Sanchez Ramos and Guadalupe Saldivar De Sanchez (Creditors), filed a complaint to determine the dischargeability of a debt against defendant-appellees, Paul R. and Hannelore S.A. Compton (Debtors). The Debtors moved for the dismissal of such complaint on the grounds that it was not timely filed under the governing bankruptcy code provisions. The bankruptcy court held, and the district court affirmed, that the complaint had to be dismissed as "untimely filed under the mandatory time frame imposed by [Bankruptcy] Rule 4007(c)." The Creditors appeal to this court.

Creditors approached Debtors in the course of the Debtors' activities as real estate agents and were shown, and ultimately made several payments toward, a condominium in El Paso, Texas.

On May 20, 1985, Debtors filed a bankruptcy petition under Chapter 7. The Debtors' schedules included the following listing:

c/o Victor Falvey

The Clerk's office relied on this listing and sent notice of the section 341(a) creditors' meeting. 11 U.S.C. § 341(a). Such notice included a statement that the 60 day period in which to file a complaint against dischargeability would expire on August 25, 1985. The notice was mailed June 3, 1985, but never received by the Creditors because Victor Falvey (Falvey) had no relationship with the Creditors.1

According to the bankruptcy court's findings and statement of facts,2 however, on May 23, 1985, Debtors' attorney, Donald S. Leslie (Leslie), contacted H. Tati Santiesteban (Santiesteban), then Creditors' attorney in relation to the real estate transaction at issue, by letter and informed Santiesteban that the Debtors had filed for bankruptcy and "advised Santiesteban to resolve the matters involving the real estate condominium transaction that is the subject matter of Creditors' complaint, through the Bankruptcy Court, and provided Debtors' bankruptcy case number."3 Correspondence on this matter continued between Leslie and Santiesteban and on July 10, 1985, Leslie sent Santiesteban a letter stating that arrangements to clear title on the condominium the Creditors were in the process of purchasing would have to be made through the bankruptcy trustee. Leslie's letter also provided contact information for the bankruptcy trustee.

On August 2, 1985, Leslie wrote Albert Armendariz, Sr. (Armendariz), the Creditors' new lawyer, and informed him of the correspondence he had had with Santiesteban.4 Leslie also enclosed a copy of a letter that he had sent Santiesteban regarding the situation. Armendariz responded with a letter to Leslie on August 21, 1985 in which he requested further information about the reports filed with the bankruptcy court about the Creditors' interest in the condominium.

On September 5, 1985, ten days following the August 26, 1985 deadline, Armendariz--acting on behalf of the Creditors--filed a "Complaint Against Dischargeability" under Bankruptcy Code sections 523(a)(2) and (4). 11 U.S.C. §§ 523(a)(2) and (4). The complaint was based on the Debtors' alleged conversion of funds of the Creditors held by the Debtors. Debtors responded by filing a motion to dismiss on September 13, 1985. The Debtors based their motion on the expiration of the time set for filing such complaints. An extension for filing was neither requested nor granted under Bankruptcy Rule 4007 prior to the running of the limitations period. Creditors opposed this motion and claimed that the complaint was filed ten days late because the Creditors had never received notice of the proceedings of deadlines from the bankruptcy court. They also pointed out that the Debtors' schedules failed to contain their complete names or address in Mexico. They alleged that their claim was not listed and, therefore, not dischargeable. Alternatively, the bankruptcy court noted that the Creditors contended that their claim was "exempt[ed] from discharge because the alleged conversion by the Debtors of the funds held in escrow does not constitute a debt contemplated by section 341(a)."

The motion to dismiss was heard by the bankruptcy court on January 13, 1986. The bankruptcy court, in an opinion rendered March 25, 1986, found that Creditors' claim was not exempted from discharge and that Santiesteban was made aware of the Debtors' bankruptcy by Leslie in a letter prior even to the mailing of the notice by the clerk. Though Creditors never received official notice of the bankruptcy from the bankruptcy court, based on the actual knowledge of Creditors' counsel--in adequate time for the filing of a response or a motion to extend the deadline--the bankruptcy court found the Creditors precluded from filing their complaint late.

The Creditors appealed and the district court--after stating that the sole issue appropriately before it was "whether the Creditors' late filing of a Complaint against dischargeability of a debt should have been considered on the merits by the Bankruptcy Court"--affirmed the judgment of the bankruptcy court.5

In accordance with the scheme of 28 U.S.C. § 158(a), the Creditors' appealed initially to the district court. However, at this point, we review the bankruptcy court's findings in the same manner as we would in an appeal coming initially from the district court. In re Commercial Western Finance Corp., 761 F.2d 1329, 1333 (9th Cir.1985) ("Because we are in as good a position as the district court to review the findings of the bankruptcy court, we independently review the bankruptcy court's decision."). Hence, we adhere to the rule that findings of fact will not be set aside unless clearly erroneous. In re Texas Research, Inc., 862 F.2d 1161, 1163 (5th Cir.1989). Legal issues, on the other hand, we decide de novo. Id.

As we are requested to review only issues of law in the case at hand, we engage in an independent review.

On appeal, Debtors ask us to consider the following two issues:

1. Whether the 60 day filing deadline for filing a complaint to dispute the discharge of a debt under Bankruptcy Rule 4007(c) "unlawfully enlarges, abridges or modifies a substantive right in violation of 28 U.S.C. § U.S.C. 2075."

2. Whether "[a] creditor's actual knowledge of Bankruptcy proceedings, without receiving formal notice of specific filing deadlines from the debtor excuses the untimely filing of a complaint objecting to the dischargeability of a debt pursuant to 11 U.S.C. § 523(a)(2) and (4)."

As the Debtors failed to raise the first of these issues below, we are constrained from considering it at this stage. Although the second issue was not raised in the same form as it is presented to us, we note that both the district court and the bankruptcy court addressed the issue of notice in their orders and conclude that the issue was raised in a manner sufficient to require us to consider it.

The Creditors ask us to find actual notice, without formal notice of filing deadlines, of a bankruptcy proceeding insufficient to bar the late filing of a complaint against dischargeability in cases arising under 11 U.S.C. §§ 523(a)(2) and (4).6 We decline this invitation in relation to the case at hand.

As noted above, Debtors listed a Mr. and Mrs. Sanchez on their schedules. However, the notice sent did not reach the Creditors because the Debtors listed an incorrect address. The "deficient" listing left the Creditors in the same position as unscheduled creditors. "It is well settled that if a debtor lists incorrectly the name or address of a creditor in the required schedules, so as to cause the creditor not to receive notice, that creditor's debt has not been 'duly scheduled' ... and if the creditor has no actual knowledge of the bankruptcy proceeding, the creditor's debt is not dischargeable." In re Adams, 734 F.2d 1094, 1098 (5th Cir.1984).

The fact that a debt is improperly scheduled does not necessarily create a right to file a complaint against discharge late. As Adams, supra, implies, where a creditor has actual knowledge of the proceedings, the debt may still be dischargeable. See also In re Frankina, 29 B.R. 983, 985 (Bankr.E.D.Mich.1983) ("The [Plaintiffs'] contention that the mere failure of the debtor to list their proper address in the schedules gives them the right to file a late complaint is without merit."). Section 523(a)(3)(B) of the Bankruptcy Code codifies this result in relation to unscheduled debts of the type described in sections 523(a)(2) and (4) as follows:

(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt--

(3) neither listed nor scheduled under section 521(1) of this title, with the name, if known to the debtor, of the creditor to whom such debt is owed in time to permit--

(B) if such debt is of 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 timely filing and request [.]

11 U.S.C. § 523(a)(3)(B) (emphasis added).7 See also In re Alton, 837 F.2d 457, 460 (11th Cir.1988) (per curiam) ("The statutory language [of section 523(a)(3)(B) ] clearly contemplates that mere knowledge of a pending bankruptcy proceeding is sufficient to bar the claim of a creditor who took no action, whether or not that creditor received official notice from the court of various pertinent dates.").

Precedent in case law also upholds a finding that notice of bankruptcy proceedings received in time to act prior to the filing deadlines, without formal notice of filing deadlines, constitutes sufficient notice--even in cases alleging fraud. Although there is a dearth of case law directly on this point in the Fifth Circuit, at least one case, Neeley v. Murchison, is apposite. 815 F.2d 345 (5th Cir.1987). In Neeley, Neeley, who had obtained a judgment based on findings of fraud against a debtor who later went into Chapter 11 bankruptcy, failed to file an objection to the dischargeability of his claim within the appropriate limitation period. Id. While Neeley received notice of the bankruptcy proceedings against the debtor from the bankruptcy clerk and was represented at the creditors' meeting, he was not informed that a dischargeability deadline had been set8 and he filed his objection to dischargeability 10 days post the time limitation set by Bankruptcy Rule 4007(c).9 Id. at 346.

Still, "[b]ecause the creditor had notice of the bankruptcy proceedings and more than ample opportunity to file his complaint in time," the panel in Neeley affirmed the dismissal of Neeley's complaint on the grounds that it was "time-barred." Id. at 345. In so holding, the Neeley court stated:

[Section] 523(c) of the Code, which Rule 4007 is designed to implement, places a heavy burden on the creditor to protect his rights: a debt of the type presented here is automatically discharged unless the creditor requests a determination of dischargeability. The one narrow exception to this rule incorporates a duty-to-inquire approach to notice issues. Under § 523(a)(3)(B), a debt is not automatically discharged if the debtor fails to schedule the creditor and the creditor had no notice or actual knowledge of the case in time to file a claim and a request for determination of dischargeability. Thus, in cases such as this one, it would be inconsistent with the scheme of § 523 to require technical compliance with the notice provision of Rule 4007: this would place the creditor who has written notice of the bankruptcy (albeit deficient notice under the Rule) in a better position than the unlisted creditor whose debt is discharged under § 523(c) if he merely learns of the bankruptcy proceedings in time to protect his rights.

Neeley v. Murchison, 815 F.2d at 347. Although the Creditors in the instant case were not properly scheduled and, therefore, are not in precisely the same position as those in Neeley, they are in a similar position in that they possessed notice of the bankruptcy proceedings at a date early enough for them to act upon their knowledge. Thus, we believe that in the case at hand the bankruptcy court and the district court correctly dismissed the Creditors' complaint.

Cases outside of the Fifth Circuit also support our conclusion. For example, in In re Price, a closely analogous case recently decided by the Ninth Circuit, an unscheduled creditor in the process of suing a debtor, in part for fraud, whose attorney received notice that the debtor had filed for Chapter 7 bankruptcy approximately two months before the running of filing deadlines, was denied permission to file a late complaint contesting the dischargeability of the relevant debt. 871 F.2d 97, 97-98 (9th Cir.1989). The Price court found that where the attorney representing the creditors in the state court in connection with the same claim that the creditors belatedly sought to have declared nondischargeable "was given actual notice of the bankruptcy proceedings in time to file a complaint, or at least to file a timely motion for an extension of time[,]" "notice to counsel constituted notice to the [creditor]." Id. at 99. Thus, the court concluded that although the creditor had not received information about filing dates, "[t]he fact that [the debtor] failed to list [the creditor] as a creditor did not relieve [the creditor] of his obligation to take timely action to protect his claim." Id. See also In re Alton, 837 F.2d at 459 (In denying an unlisted creditor with actual knowledge of bankruptcy proceedings an extension to file an objection to discharge of debt allegedly arising from fraud, court held: "Despite the misleading actions, inadvertent or intentional, of debtor Alton, the time specifications set out in the Bankruptcy Code are sufficiently clear to have placed an obligation on creditor Byrd to follow the case and to take the timely action necessary to pursue his claim.").10

Based on the foregoing, we are convinced that the bankruptcy court and the district court acted appropriately in dismissing the Creditors' complaint on the basis of untimeliness.11 Moreover, contrary to the Creditors' arguments, we believe that a discharge in the instant case is not contrary to public policy or Congressional intent. "Section 523(a)(3)(B) specifically provides that when a debtor fails to list those debts incurred fraudulently or incurred because of malicious injury to another or lists them too late to allow a creditor to file a proof of claim and a dischargeability complaint in timely manner, then those debts will be discharged 'unless such creditor had notice or actual knowledge of the case in time for such timely filing and request' (emphasis added)." In re Alton, 837 F.2d at 460 (quoting 11 U.S.C. 523(a)(3)(B)) (footnote omitted). As the provision stands, it protects creditors against whom fraud has been perpetrated and who lack awareness of bankruptcy proceedings. However, it explicitly places a burden on creditors with knowledge of bankruptcy proceedings to act to protect their rights. As the Eleventh Circuit sums up the policy considerations:

This [11 U.S.C. 523(a)(3)(B) ] furthers the bankruptcy policy of affording a 'fresh start' to the debtor by preventing a creditor, who knew of a proceeding but did not receive formal notification, from standing back, allowing the bankruptcy action to proceed without adjudication of his claim, and then asserting that the debt owed him is undischargeable.

Id.; see also In re Sam, 94 B.R. 893, 898 (Bankr.W.D.La.1988) ("Responsibility to inquire into the deadline for filing a complaint is not so burdensome as to outweigh the 'fresh start' policy and the need for expeditious judicial administration of bankruptcy cases."). Given the circumstances of the case sub judice, we see no reason to deviate from this well established policy.

For all of the above reasons, we AFFIRM the district court's judgment, affirming the bankruptcy court's judgment.

AFFIRMED.