Bankruptcy Court Reviews Exceptions to General Rule Denying Discharge for Omitted Debts in Chapter 13 Cases

Bankruptcy Court Reviews Exceptions to General Rule Denying Discharge for Omitted Debts in Chapter 13 Cases

On April 3, 2019 the Bankruptcy Court for the District of Kansas determined that an unscheduled debt in the Debtor’s chapter 13 case was discharged. The court reviewed several arguments for exceptions from the general rule that unscheduled debts are not discharged in a chapter 13 case. The court examined the following issues:

  • Should an omitted debt be discharged in a no asset chapter 13 as is the rule in no asset chapter 7 cases?
  • Should an omitted debt be discharged if the debtor had no knowledge about the claim in time to include it in the schedules before the bar date has expired?

Prior to filing bankruptcy, the Debtor was a tenant of the Landlord. Debtor left the property thinking he was current on all his obligations. The Landlord believes he still owed several months rent and late charges. On August 28, 2015 the Debtor filed a voluntary petition under Chapter 13. The Debtor did not list the Landlord in his schedules. The plan was confirmed and the claims bar date expired.

Two and a half years later Landlord’s attorneys learned of Debtor’s residence and mailed him a letter collecting on the amount owed, $1,100.00 plus interest. Debtor’s counsel notified Landlord’s counsel of the bankruptcy and filed an amended schedule F listing the Landlord as a creditor. Several months later the Debtor filed a motion for discharge notifying all creditors including the Landlord. No objections were filed and the discharge was entered. No disbursements were made to unsecured creditors in Debtor’s bankruptcy.

Subsequently Landlord’s counsel informed Debtor’s counsel that it received notice of the discharge but asserted the debt was nondischargeable under 11 U.S.C. § 523(a)(3). Debtor then filed a motion to determine dischargeability of the debt.

In general, an omitted claim is excluded from discharge. 11 U.S.C. § 1328(a)(2) provides that a chapter 13 discharge does not discharge debts specified in § 523(a)(3). Section 523(a)(3) includes any debt

(3) neither listed nor scheduled under section 521(a)(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—

(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 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;[i]

11 U.S.C. §523(a)(3)

The court examined whether the omitted debt was discharged in this case as follows.

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