Opinion ID: 726693
Heading Depth: 2
Heading Rank: 3

Heading: Robinson Factors

Text: 15 When debtors fail to schedule creditors properly, a bankruptcy court may permit out-of-time amendments, but only if exceptional circumstances and equity so require[ ]. Matter of Stone, 10 F.3d 285, 289 (5th Cir.1994). Appellants therefore argue that the bankruptcy court erred by not allowing an out-of-time amendment to include INA. The decision to reopen a bankruptcy case and allow amendment of schedules is committed to the sound discretion of the bankruptcy judge and will not be set aside absent abuse of discretion. In re Jones, 490 F.2d 452 (5th Cir.1974). 16 Our decision in Robinson v. Mann, 339 F.2d 547 (5th Cir.1964), is the touchstone for determining whether a debt is dischargeable under section 523(a)(3). Stone, 10 F.3d at 290. Robinson identified three relevant factors in evaluating whether a debtor's failure to list a creditor properly will prevent discharge of the unscheduled debt: (1) the reasons the debtor failed to list the creditor; (2) the amount of disruption that would likely occur; and (3) the prejudice suffered by the listed creditors and the unlisted creditor in question. Robinson, 339 F.2d at 550. 17 Under Robinson's first factor, a court should not discharge a debt under section 523(a)(3) if the debtor's failure to schedule that debt was due to intentional design, fraud, or improper motive. If the failure is attributable solely to negligence or inadvertence, however, equity points toward discharge of the debt. Stone, 10 F.3d at 291 (citations omitted). The burden is on the debtor ... to demonstrate absence of fraud or intentional design. Springer, 127 B.R. at 708. 18 In evaluating the debtors' motives, we owe deference to the critical role bankruptcy judges play in making credibility determinations. See Fed.R.Civ.P. 52(a); Bankr.R. 8013. In this case, the bankruptcy court unequivocally found that Mr. Faden's reasons for failing to provide adequate notice were incredulous. 19 The Court finds that Alan Faden's testimony was vague and not credible as to why he did not make a good faith effort to provide a correct address for this creditor. Indeed, this Court finds that Debtors demonstrated very little effort to provide counsel with proper addresses as to any of their creditors. However, INA is the only creditor which has pursued the matter. 20 The court also found that Alan Faden was not forthcoming with his counsel as to his creditors' addresses. Thus, instead of indicating mere inadvertence, the debtor's testimony suggested to the court that he intentionally or recklessly avoided supplying INA's proper address. Because no evidence suggests that this finding was clearly erroneous, the bankruptcy court did not abuse its discretion in declaring the debt non-dischargeable. 21 In In re Matter of Smith, 21 F.3d 660, 665 (5th Cir.1994), we similarly denied equitable relief. There, debtors first claimed that they could not find the creditor in order to properly schedule it. Then, two and one half years later, debtors scheduled the creditor, but listed the wrong address. 22 The bankruptcy court found that the debtors could have learned [the creditor's] correct address by picking up the telephone and concluded that it could not condone such 'a lack of diligence on the part of the debtor.' Coupled with the fact that the debtors apparently failed properly to schedule a number of other creditors for several years, their error with regard to [this creditor] can hardly be termed mere negligence or inadvertence. 23 Id. at 664. As in Smith, the bankruptcy court in this case believed that Appellants were more than negligent in the failure to properly schedule INA. Moreover, like Smith, the bankruptcy court found that the Fadens' irresponsibility extended to other creditors as well. 24 Although Smith went on to also find that prejudice had resulted, we have held that a deficiency under Robinson's first factor alone permits a court in the exercise of its sound discretion to deny relief. As our distinguished colleagues in the Sixth, Seventh, and Eleventh Circuits have determined, a court should not discharge a debt under section 523(a)(3) if the debtor's failure to schedule that debt was due to intentional design, fraud, or improper motive. Stone, 10 F.3d at 291 (citing In re Soult, 894 F.2d 815, 817 (6th Cir.1990); Matter of Baitcher, 781 F.2d 1529, 1534 (11th Cir.1986); In re Rosinski, 759 F.2d 539, 542 (6th Cir.1985); Matter of Stark, 717 F.2d 322, 323-24 (7th Cir.1983)). Thus, even absent prejudice, equitable action should not be taken in cases where the debtor's failure to properly schedule a creditor is a result of more than mere negligence or inadvertence. Therefore, despite the slight prejudice to INA, we find no abuse of discretion in the bankruptcy court's refusal to reopen the case. 25 We acknowledge, of course, that section 523(a)(3) must be construed with an eye toward the equitable principles which underlie bankruptcy law. Stone, 10 F.3d at 290. In fact, the enactment of section 523(a)(3) legislatively overruled an earlier Supreme Court decision requiring strict construction of the no-notice ground for non-dischargeability. Id. However, there are limits to section 523(a)(3)'s elasticity. When a bankruptcy judge, after listening to all of the testimony, finds that a debtor shirked his responsibility to provide notice to his creditors, this Court cannot then usurp the role of the bankruptcy judge and mandate its own equitable relief. We instead must defer to the bankruptcy court's findings relevant to the Robinson factors and review only for abuses of discretion.