*District Judge of the Western District of Louisiana, sitting by designation. 

United States Court of Appeals,

Fifth Circuit.

No. 92-2363.

In the Matter of Bobby Newton BRADLEY, Debtor.

Bobby Newton BRADLEY, Appellant,

v.

Philip W. BARNES, Individually and in his capacity as Commissioner of Insurance of the State of

Texas, Appellee.

April 29, 1993.

Appeals from the United States District Court for the Southern District of Texas.

Before WISDOM and DUHÉ, Circuit Judges and DOHERTY**, District Judge.

WISDOM, Circuit Judge:

ear the plaintiff's claim ........................................................................................ We hold that

the bankruptcy court has subject matter jurisdiction. We reverse the judgment of the district court

and remand this case to the district court.

I.

Bobby Newton Bradley sold insurance in Texas. On February 2, 1987 he sought relief from

his debts as a bankrupt under Chapter 7 of the Bankruptcy Code. On August 10, 1988, he received

his discharge in bankruptcy. One of the creditors listed in his bankruptcy petition was Dr. Leopold

Villegas. In December 1989, the Commissioner of Insurance of the State of Texas (Commissioner)

commenced proceedings to revoke Bradley's license as an insurance agent because he had allegedly

defrauded Villegas by accepting his money but failing to remit the premiums to him. Villegas was

listed in the Chapter 7 proceeding, so it would seem that his claim had been fully discharged. The

Insurance Commission and Bradley agreed on March 23, 1990 that Bradley's license would not be

revoked if he paid Villegas $18,000 ($1,500 a month for twelve months), which would constitute

complete restitution for Villegas. The last sentence of this order between the Commissioner and
 

1

§ 525(a) states that, "a governmental unit may not deny, revoke, suspend, or refuse to renew

a license, permit, charter, franchise, or other similar grant to, condition such a grant to,

discriminate with respect to such a grant against ... a person that is or has been a debtor under this

title ... solely because such bankrupt ... has not paid a debt that is dischargeable in the case under

this title or that was discharged under the Bankruptcy Act." 

 

2U.S.Code Cong. & Admin.News 1978, at 5787, 5963, 6401. 

Bradley statesthat if Bradley "failed to make such restitution in the full amount within the time herein

specified, Bobby Newton Bradley's Group I, Legal Reserve Life Insurance Agent's license, shall be

revoked". Bradley had the assistance of counsel at the time he entered into this agreement.

Bradley failed to adhere to the payment schedule and alleges that he was informed through

his state representatives that the Commissioner would not renew his license. At this time, the

Commissioner has not instituted proceedings to revoke Bradley's license. Bradley filed suit in the

United States Bankruptcy Court for the Southern District of Texas alleging that the March 23, 1990

order violated the anti-discrimination provision of the bankruptcy code (11 U.S.C. § 525).1 The

bankruptcy court dismissed the case with prejudice for want of jurisdiction and the district court

affirmed. This appeal followed.

II.

 We review a dismissal for want of subject matter jurisdiction de novo.

The district judge affirmed the bankruptcycourt's holding oflack ofsubject matterjurisdiction

because "the debtor's decision to enter into a settlement with the Commissioner in order to retain his

license is clearly conduct that occurred after the discharge and final resolution of the bankruptcy and

cannot therefore be related to the debtor's original bankruptcy claims". Generally, jurisdiction over

bankruptcyproceedings ceases with the closing ofthe bankruptcy estate, but Congress hasstated that

in some instances jurisdiction continues after the estate is closed because the proceeding would still

"arise under" title 11. A § 525 prejudice proceeding was the example Congress used of such an

instance.2 This follows from the principle underlying § 525, for if it protects former bankrupts from

subsequent discrimination which resultsfrom previously discharged debts, then the cases must occur
 

3

§ 525 also applies to debtor's currently in bankruptcy, but in that instance this issue of

jurisdiction after the closing of the estate would not arise. 

 

4Applegate v. March, 64 B.R. 448, 450 (Bkrtcy.E.D.Va.1986). 

 

5

See e.g., Matter of Holder, 40 B.R. 847 (Bkrtcy.E.D.Wis.1984). 

 

6Holder states this impermissible quid pro quo. Id. at 850. 

 

7

In re Barley, 130 B.R. 66, 69 (Bkrtcy.N.D.Ind.1991). See Bankruptcy Rule 4007(c). 

after the resolution of the bankrupt's estate.3

The jurisdictional grant in § 525 is broad. One bankruptcy court has stated: "No court in

the realm holds such a wide subject matter jurisdiction as does the Bankruptcy Court ... the entirety

of § 525, every word, is utterly sweeping."4 We are not aware of any bankruptcy court, wi th the

exception of the one in this case, which has dismissed a possible § 525 violation on the basis of lack

of subject matter jurisdiction. There are numerous cases in which a court has found no violation of

§ 5255, but ifthere is a potential violation of § 525, then the court must take jurisdiction. Section 525

does not prohibit a state from denying or revoking a license based upon a determination that the

public safety would be jeopardized by granting or allowing continued possession of a license, but it

does prohibit a state from exacting a discharged debt as the price of receiving or retaining a license.6

The Commissioner in the order of March 23, 1990 in lieu of revoking Bradley's license

ordered him to pay Dr. Villegas the amount owed him, an amount which it seems was discharged in

Bradley's August 10, 1988 Chapter 7 bankruptcy. We use the term "seems" because the

Commissioner suggests that the Villegas debt was procured by fraud and therefore was not

discharged per 11 U.S.C. § 523. Unless Villegas was improperly notified of the Chapter 7

proceeding, his opportunity to challenge the discharge because of fraud would almost certainly have

expired by now unless he received an extension by the bankruptcy court.7 The record before us

indicates neither improper notification nor any extension or any other explanation of how the

Commissioner's current suggestion of fraud bears on the 1988 discharge. We leave it to the

bankruptcy court on remand to make any necessary further inquiries and holdings concerning fraud.

A second inquiry which the bankruptcy court must make is the effect of Bradley's consent to
the March 23, 1990 order. Even if the order would otherwise violate § 525, Bradley's consent

(especially as he had the assistance of counsel) may negate any § 525 violation. We make no

comments on the merits of the consent issue.

III.

At this stage it is unclear whether a violation of the anti-discrimination provision of the

Bankruptcy Code has o ccurred. We make the limited holding that Bradley has offered sufficient

evidence so that the bankruptcy court must take subject matter jurisdiction to determine whether the

Commissioner's March 23, 1990 order violates 11 U.S.C. § 525.

REVERSED and REMANDED.