Leaving debts off your banruptcy filing
In yet another departure from commonly accepted views of bankruptcy law, the first circuit yesterday just rejected the holding of Beezley that unscheduled debts are nonetheless discharged in a no-asset 7 bankruptcy. Unfortunately, there is a line of bankruptcy court cases that refuse to reopen to include an omitted creditor. Now we will have to argue that those cases are wrong because the First Circuit basically said so. That's kinda where Breezley came from. There was an omitted creditor and a motion was filed to reopen, and the 9th said no reason to reopen, because in a no asset case, the only thing that happens is that the right to contest the discharge of a certain debt is left open until notice is given and an opportunity to object can be taken. If the debt is not one that can be contested then no harm no foul, and if it can be objected to, then the discharge as to that debt was not final, and it will be deemed not discharged and collection activity can begin. The 8th cir follows Breezley in that no judge around here will reopen to add an omitted creditor. If the 8th were to follow the 1st then I suppose we too would have to start filing motions to reopen to add omitted creditors. Maybe the quickest way of what seems to be a nightmarish quagmire would be an amendment to the rules codifying Beezley. Maybe with a twist that would allow an omitted creditor to contest bankruptcy discharge somehow if they would have had grounds. I haven't thought this completely through -- I know there's a 1-year statute of repose on revoking a discharge, but perhaps there's a way around that that would satisfy the reasoning of our esteemed First while still making our lives easy in no-asset cases. In Illinois and around the nation, the post-start bankruptcy case of Mendiola (Bankruptcy, ND IL) is routinely cited for the proposition that an omitted creditor is nonetheless discharged in a no-asset bankruptcy case. I can't imagine that Judge Barliant would have decided Mendiola in contravention of Stark. So I have to assume that Stark is distinguishable from Beezeley.
