Opinion ID: 450613
Heading Depth: 1
Heading Rank: 4

Heading: The Petition to Amend

Text: 12 Under current law, Ms. Rosinski may be prevented from amending her schedule only if her failure to include the creditor on the original schedule can be shown to have prejudiced him in some way or to have been part of a scheme of fraud or intentional design. Stark v. St. Mary's Hospital (Matter of Stark), 717 F.2d 322 (7th Cir.1983); In re Meile, 36 B.R. 719, 720 (Bkrtcy.S.D.Ill.1984). Thus the key inquiry is whether Ms. Rosinski's failure to include Willard Boyd on the original schedule of assets and liabilities has deprived him of remedies available under the Bankruptcy Code or whether there was evidence that the exclusion was fraudulent or intentional. 13 Of recent cases dealing with these issues Stark v. St. Mary's Hospital most closely parallels the case at bar. In Stark, the debtors had filed a joint bankruptcy petition and had been granted a discharge. The Starks failed to include a debt to St. Mary's Hospital on their bankruptcy schedules because they had health insurance which they presumed would cover the bill. After the hospital filed suit and obtained a judgment, the Starks filed a motion for relief with the Bankruptcy Court seeking to reopen their estate in order to add, and subsequently discharge, the hospital's debt. The bankruptcy court denied the motion. On appeal, the United States District Court for the Central District of Illinois, reversed the decision and allowed the reopening of the estate. The district court was then upheld by the Seventh Circuit. 14 Like the case at bar, the key inquiry in Stark involved whether the creditor had been harmed by being excluded from the bankruptcy schedules and whether or not the omission was due to fraud or intentional design. In Stark, the Seventh Circuit specifically found that: 15 ... In a no-asset bankruptcy where notice has been given pursuant to Rule 203(b), a debtor may reopen the estate to add an omitted creditor where there is no evidence of fraud or intentional design. In this case the creditor has not been harmed in any way, and the debtors have not be required to forfeit any of their benefits under the Bankruptcy Code. 16 Stark, 717 F.2d at 324. Though there was no factual finding that there was adequate notice given in the case at bar, Ms. Rosinski, like the Starks, does not possess assets subject to the claims of creditors, thus making it unnecessary to file a claim unless additional assets are discovered. If assets are found and a payment of dividends appears possible, creditors are to be notified and granted a reasonable time to file their claims. In Matter of Zablocki, 36 B.R. 779, 781-82 (Bkrtcy.D.Conn.1984); Stark, 717 F.2d at 324; Bkrtcy. Rule 3002(c)(5). 17 In the case at bar, it is clear that there are no assets from which creditors may be paid dividends and there is no prejudice to Willard Boyd with respect to relief available to him under the law. Though he did not receive any earlier notice, Willard Boyd has not lost his opportunity to file a proof of claim sufficient for him to share equally with creditors who were initially scheduled. In Matter of Zablocki, 36 B.R. 779 (Bkrtcy.D.Conn.1984) 779 citing Stark, 717 F.2d at 324. Though creditors have a right to timely file a claim, the Stark Court found as a matter of law that a debtor's right to reopen a case in order to obtain a discharge of a debt is paramount under the Bankruptcy Code. 18 We agree with the Seventh Circuit's finding in Stark. Under the Code, only the creditors' rights to participate in a dividend and to obtain a determination of dischargeability are of such importance that their lost mandates exception of a late scheduled debt from discharge. In Matter of Zablocki, 36 B.R. at 783. In the case at bar, allowing amendment of a schedule to discharge Willard Boyd's debt does not negatively affect either of those rights. His claim is clearly dischargeable and he retains the right to file a claim for any future assets that might be discovered. 19 Though amendments to schedules are generally to be granted liberally, Ms. Rosinski must advance some justification for the reopening sufficient to show that she did not intentionally or recklessly avoid listing the debt. In the Matter of Davidson, 36 B.R. 539, 543 (Bkrtcy.D.N.J.1983). Ms. Rosinski had a legitimate reason for assuming Willard Boyd had received notice. On appeal, Ms. Rosinski's attorney asserted that the debtor felt notice had been given to Willard Boyd because Arnold Boyd's attorney had told Ms. Rosinski that he was representing Arnold and Willard Boyd. Even without such a statement, the familial relationship between Arnold and Willard and Willard's statements that Arnold handled all business affairs regarding the secured property in Detroit is sufficient for the Debtor to have reasonably assumed that Willard Boyd had received notice. Jt.App. at 21, 24. At the very least, Ms. Rosinski did not engage in fraud or a scheme in omitting Willard Boyd from the schedule. Furthermore, Mr. Boyd is not prejudiced in any way by his omission from the schedule. 20 Accordingly, we reverse and remand to the District Court with instructions to remand to the Bankruptcy Court to allow Ms. Rosinski to amend her schedule of assets and liabilities.