Adversary Proceeding Questions (pretty unusual case)

[kjarvi]

I filed a Chapter 7 back in 2009, but one of my creditors was not included in the original petition. This was an asset case (about 14k) and the proof of claim deadline was May 17th. I have since received a discharge. Long story short, the creditor was not added until after the proof of claim deadline, and now they have brought an adversary proceeding claiming exception to the discharge under 523(a)(3).

I need to know if there is any deadline to file an adversary proceeding in a case like this and what happens after I file an answer to the complaint??

Any advice is very much appreciated!

[AngelinaCat]

Did an attorney prepare and file your case? If so, you need to get with that person ASAP.

I have been researching the Internet, and so far everything I have found deals with NO Asset cases. There is next to nothing--if anything--that I have found so far that deals with Asset cases. Though certainly there has to be something out there.

With that said, we were an Asset Ch7, and filed 12/28/2007. The trustee made the determination that we were an Asset case in March 2008--our 341 was Feb 7, 2008. At that time, an additional 30 days was added to allow for the creditors to file their objections. I have read of others on this forum, with Asset cases, being extended for even longer periods of time. My question is, why your trustee did not do the same in your case, once this forgotten creditor was added to your schedules? That is something you need to ask your attorney. Or, if you can add some more information to help the members form their answers, that would be great.

In any event, Welcome to the forum.

[justbroke]

The only time that a creditor, in an asset case, could be deemed harmed is if they were not entitled to distribution from the Trustee. The key problem is that they were not entitled to distribution because a.) they weren't Scheduled, and b.) the claim bar date has passed.

Unfortunately, that means that their debt is non-dischargeable! They are filing an Adversary Proceeding (AP) just to make sure that they can treat the debt as non-dischargeable, and they are highly likely to win.

Were you represented by an attorney? If so, you really need to contact them and pay them to deal with this. It is highly likely that you will need to stipulate to a settlement to make it go away. You'll probably be out your attorney fees, plus their attorney fees, plus a modest settlement amount. What the offer would be is unknown, but they have a good case. Your attorney "could" argue with their attorney that if they had received a distribution from the Trustee, it would have only been X% of that $14K. So, that's a starting point.

I see problems here. Unless you can prove that the Creditor had knowledge, then the debt is, more than likely, nondischargeable. This does not mean that the Creditor needed to receive a letter or fax or e-mail. It only means "constructive" notice, which could mean that you told them on the phone or they subscribe to a notification system for bankruptcies. Short of that, if they didn't have constructive or actual notice... this seems like a slam dunk for them.

On your procedure question asking whether there is a deadline to file this type of complaint? Yes there is, but I'd say no for this particular case. The reason is because they never had notice of the case. Now, if they had notice of the case before the bar date to file a Dischargeability Complaint (60 days after the first scheduled 341 Meeting), then they may be precluded from filing a complaint. However, 11 USC 523 is pretty clear that a complaint is not required when you fail to notice (and schedule) a creditor in time for them to file a claim before the claims bar date has expired.

I think they are filing the Complaint and starting an AP for two reasons. First, to ask the Court to make a declaratory ruling that the debt wasn't discharged. Second, to put you on notice that they have you dead to rights, and to probably work out a settlement, in their favor.

Oh, and this is not that unusual. Unfortunately, it happens all the time. However, many creditors aren't too savvy. I'm wondering if this debt was purchased and it's a Junk Debt Buyer (JDB) pursuing the debt.