Court Opinion

ID: 9686469
Source: CourtListenerOpinion
Date Created: 2023-08-24 15:49:47.879291+00
Date Added: 2024-06-11T09:44:00.593683
License: Public Domain

VOLINN, Bankruptcy Judge,
concurring:
I concur in the result. This case is determined by the ruling in Urbatek Systems v. Lochrie (In re Lochrie), 78 B.R. 257 (9th Cir. BAP 1987), which squarely faced the question whether section 523(a)(3)(B) requires a dischargeability trial where the creditor has not been scheduled and claims under sections 523(a)(2), (4) and (6) are involved.1 The court in Lochrie reasoned:
The purpose of § 523(a)(3)(B) is to allow a creditor to file a nondischargeability complaint when it would otherwise be barred by the time limitations of § 523(c) and Bankruptcy Rule 4007(c)....
Section 523(a)(3)(B) does not create a separate exception from discharge merely for the debtor’s failure to schedule a creditor. Instead, the creditor must also have a cause of action under § 523(a)(2), (4), or (6). Mere allegations of a cause of action are not sufficient. “It remains necessary for the creditor to prove its *756case under either code § 523(a)(2), (4), or (6) because 11 U.S.C. § 523(a)(3)(B) only applies if such a case can be established.” 1 Norton Bankruptcy Law and Practice, § 27.67 n. 10 (1981)....
Absent prejudice to the creditor by reason of omission from the schedules, the creditor must prove its cause of action under § 523(a)(2), (4), or (6), in order to prevail under § 523(a)(3).
Lochrie, 78 B.R. at 259.
It may be that the decision in Laczko v. Gentran, Inc. (In re Laczko), 37 B.R. 676 (9th Cir. BAP 1984), aff'd without opinion, 772 F.2d 912 (9th Cir.1985), has been overruled or modified sub silentio. The nature of the debt in Laczko was not stated. The court simply ruled in Laczko that an unscheduled creditor’s claim is not discharge-able under section 523(a)(3), except possibly in cases for which creditors were notified not to file claims. Id. at 678-79. See also Stark v. St. Mary’s Hospital (In re Stark), 717 F.2d 322 (7th Cir.1983); In re Ratliff, 27 B.R. 465 (Bankr.E.D.Va.1983) (holding that even though the period for filing proofs of claim has elapsed, a debtor in a no asset case can amend his schedules to add an omitted creditor in the absence of a showing of fraud or harm to the creditor).
With respect to the problem of reopening cases to explore the dischargeability of omitted debts, discretionary powers of the court to allow amendment of schedules may be the most practicable approach. As stated in Laczko, the decision in Robinson v. Mann, 339 F.2d 547 (5th Cir.1964), reh’g denied, 341 F.2d 297 (5th Cir.1965), represents the liberal rule. Laczko, 37 B.R. at 678. The court held in Robinson that bankruptcy courts have equitable discretion to allow amendment of schedules after the expiration of the claims period under exceptional circumstances, directing that the relevant considerations are (1) reasons for the omission, (2) extent of disruption attendant to the amendment, and (3) consequent prejudice to any creditor. Id. at 550. The court in Laczko thereby interpreted the Robinson decision as suggesting that justification for amendment exists when (1) the case is a no-asset one, (2) there is no fraud or intentional laches, and (3) the creditor was omitted through mistake or inadvertence. Id. at 679. See also Rosinski v. Boyd (In re Rosinski), 759 F.2d 539 (6th Cir.1985); Stark, 717 F.2d 322 (both holding that a debtor may reopen a no-asset case to add an omitted creditor when there is no evidence of fraud, intentional design or reckless disregard for the accuracy of schedules and the creditor is not prejudiced).
The Robinson approach would clarify the law and provide for a balance, which would allow for the debtor to have a discharge. As pointed out in Lochrie, “there is . a strong presumption in favor of discharge and a fresh start for the honest debtor. ‘Exceptions to this general policy should be strictly construed against an objecting creditor and in favor of the debtor’s right of discharge.’ In re Vickers, 577 F.2d 683, 687 (10th Cir.1978).” Lochrie, 78 B.R. at 259. On the other hand, a creditor with a good faith nondischargeability claim should not be prejudiced by the passage of time, having disabled his ability to prove his case. Under the approach of Robinson, the debtor could not require a discharge hearing when his omission or inaction prejudiced a creditor from prosecuting a bona fide dischargeability claim; nor would the creditor have the windfall of escaping compliance with the requisites of proving non-dischargeability under section 523 simply by virtue of an inadvertent, but nonprejudicial, omission of his debt.

. I note the seeming paradox between sections 523(a)(3)(A) and (B) by which an omitted creditor’s claim may be automatically excepted from discharge if not classifiable under sections 523(a)(2), (4) or (6), but requires adjudication if pursued under those sections.