1st Circuit BAP Explains The Bankruptcy Rules Concerning Motions to Vacate Judgments

1st Circuit BAP Explains The Bankruptcy Rules Concerning Motions to Vacate Judgments

On August 28, 2019, the First Circuit Bankruptcy Appellate Panel affirmed a pair of orders from the Bankruptcy Court denying Debtor’s motions to vacate. This was an unpublished opinion.

The Debtor filed a chapter 13 petition in September 2016 asserting an ownership interest in a two-family dwelling (the “Property”). Prior to the bankruptcy filing the Debtor and the Property were involved in foreclosure actions. The Debtor filed a plan that did not provide any treatment for the secured claims. He also asserted a homestead exemption on the Property.

The Trustee objected to the plan because it failed to provide for secured claims. At the hearing, the Bankruptcy Court gave the Debtor 30 days to amend the plan.

The Trustee also objected to the homestead exemption alleging the Debtor no longer held title to the Property. At the hearing the Bankruptcy Court ordered Debtor to respond to the Trustee’s objection and file an adversary with respect to the Property because the Debtor indicated that the foreclosures were invalid. The Debtor filed a response that the exemption was valid because the foreclosures were invalid.

The Debtor then filed a motion to amend plan and an amended plan neither of which addressed the secured claims. The Debtor also amended his schedules which in part reasserted his homestead exemption. No adversary proceeding was filed.

The Trustee filed objections to the plan and the exemptions on the same grounds and pointing out that the adversary proceeding had not been filed as required by previous order. The Bankruptcy Court sustained the Trustee’s objection to the amended plan and gave the Debtor another 30 days to file a new plan. At the hearing on the exemptions, the Bankruptcy Court gave the debtor an additional 13 days to file a supplemental response along with a title search for the Property. The Debtor failed to comply with that order.

At about the same time the Debtor filed a motion for sanctions for violation of the automatic stay against the mortgage creditor. The mortgage creditor asserted there was no violation because the Debtor no longer had any legal or equitable interest in the Property. The Bankruptcy Court conducted a hearing and denied the motion for sanctions.

Also, about the same time, the Trustee filed a motion to dismiss the Debtor’s case for unreasonable delay and failure to commence the adversary proceeding. The hearing was set for May 17, 2018. On the day of the hearing the Debtor filed the adversary proceeding against the mortgage creditor. On the same day the Court granted the motion to dismiss. The Debtor did not appeal the order.

Instead on June 1, 2018 (fifteen days after the dismissal order) the Debtor filed a motion to vacate the dismissal order raising allegations of fraud by the mortgage creditor in state court and in the automatic stay violation proceeding. The Court denied the motion to vacate on the same day (June 1). On June 4, 2018 the Court denied the Debtor’s motion to amend plan as moot in light of his dismissal.

On appeal, the BAP considered whether the Bankruptcy Court erred in its denial of the motion to vacate and order denying the motion to amend under Fed.R.Bankr.P. 9023 and 9024.


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