Opinion ID: 658128
Heading Depth: 2
Heading Rank: 2

Heading: History of 11 U.S.C. Sec. 523(a)(3)(A)

Text: 6 Section 523(a)(3)(A) of the Bankruptcy Code penalizes a debtor for failing to list all of his creditors and debt on applicable schedules. The statute provides that a debt may not be discharged if it was neither listed nor scheduled under section 521(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 ... timely filing of a proof of claim, unless such creditor had notice or actual knowledge of the case in time for such timely filing ... 11 U.S.C. Sec. 523(a)(3)(A). Section 17(a)(3), the predecessor to section 523(a)(3)(A), similarly provided that unscheduled debts were not dischargeable. The provision read as follows: 7 A discharge in bankruptcy shall release a bankrupt from all of his provable debts, whether allowable in full or in part, except such as ... have not been duly scheduled in time for proof and allowance, with the name of the creditor, if known to the bankrupt, unless such creditor had notice or actual knowledge of the proceedings in bankruptcy. 8 Section 17(a)(3), Bankruptcy Act, codified at 11 U.S.C. Sec. 35(a)(3) (repealed by the Bankruptcy Reform Act of 1978) (as quoted in In re Adams, 734 F.2d 1094, 1098 (5th Cir.1984)). 9 The Supreme Court construed this failure-to-list provision quite strictly in Birkett v. Columbia Bank, 195 U.S. 345, 25 S.Ct. 38, 49 L.Ed. 231 (1904). There, the debtor, Mr. Birkett, filed a voluntary petition for bankruptcy and failed to include one of his creditors, Columbia Bank, on his schedules. Unlike this case, however, Columbia Bank first learned of the bankruptcy proceedings almost two months after the discharge of the case. Mr. Birkett contended that section 17(a) was inapplicable since his failure to list Columbia Bank was due to inadvertence and since Columbia Bank learned of the bankruptcy proceeding in time to protect its rights. 10 The Supreme Court rejected both arguments. As to the former contention, the Court ruled that a debtor's neglect or inadvertence is irrelevant and cannot preclude the discharge of unscheduled debt. Id. at 351, 25 S.Ct. at 44. As to the latter argument, the Supreme Court determined that Columbia Bank did not have actual knowledge of the bankruptcy action. The Court ruled that actual knowledge is a knowledge in time to avail a creditor of the benefits of the law,--in time to give him an equal opportunity with other creditors ... Id. The debt in question was therefore deemed nondischargeable under section 17(a)(3) of the Bankruptcy Act. 11 Almost forty years later, the Second Circuit, following the Supreme Court's guidance in Birkett, held that section 17(a)(3) contained no exceptions. Milando v. Perrone, 157 F.2d 1002, 1004 (2d Cir.1946). In the Milando court's view, the failure-to-list provision forbade the discharge of unlisted debt even if the creditor learned of the bankruptcy proceeding in time to participate in the distribution of dividends. Id. 12 This Court construed the law quite differently in Robinson v. Mann, 339 F.2d 547 (5th Cir.1964). Focussing upon the equitable powers of the bankruptcy court, this Court rejected other decisions which had held that debtors were absolutely barred from amending their schedules after the proof-of-claim period. 6 Id. at 549. Unlike Birkett and Milando, the Robinson Court determined that out-of-time amendments would be allowed--but only if exceptional circumstances and equity so required. Id. at 550.