In Chapter 7 Bankruptcy Time Limits Conflict with Notice Provisions

When a Debtor files a Chapter 7 bankruptcy petition, creditors and other interested parties must meet certain time limits in order to challenge discharges of certain debts and additional developments in the case. But, in some instances, whether these time limitations should apply, may depend on whether these creditors and interested parties have sufficient notice of the pendency of a Chapter 7 bankruptcy action in order to exercise their prerogatives. A recent decision by the United States Bankruptcy Court in New Mexico demonstrates this question.

When Kathleen Blair Humphrey (“Defendant”) filed her Chapter 7 bankruptcy case on October 11, 2013 (the “Petition Date”), she also provided a list of creditors and other parties in interest including Newton Wheat (“Wheat”), shown as Defendant’s non-filing spouse – but not as a creditor. Wheat, an adult who has been adjudicated incompetent and who resides now in an assisted-living facility in Nevada, did receive notice but his appointed guardian who is his daughter, Julie Brown (“Plaintiff”), did not.

Under the rules governing Chapter 7 bankruptcies, a complaint objecting to a debtor’s discharge must be filed no later than 60 days after the first date set for the meeting of creditors under § 341(a), according to Fed.R.Bankr.P. 4004(a). And that same rule requires that at least 28 days’ notice of the time be given to the United States trustee and all creditors as provided in Rule 2002(f) and (k) and to the trustee and the trustee’s attorney to make valid objections. Rule 4007 of the federal bankruptcy rules also permits a complaint to determine the dischargeability of a debt under § 523(c)  so long as it is filed no later than 60 days after the first date set the  § 341(a).meeting.

But in the Chapter 7 bankruptcy known as In re Humphrey,  No. 7-13-13349 TA, Adv. No. 14-01024 T (U.S. Bankr. Ct. D. NM 2014), when the Plaintiff filed an adversary proceeding by filing a Complaint to Determine Dischargeability of Debts and for Denial or Revocation of Discharge on March 11, 2014 – more than 57 days after the stated deadline to file such complaint – the court was faced with the issue of whether that complaint should be denied for lack of timely filing. In its order dated July 3, 2014, the bankruptcy court appeared to be sympathetic to Plaintiff’s argument that the Debtor should have given notice to the Plaintiff as she serves as the guardian for Debtor’s spouse. The Court decided to give Ms. Humphrey an additional thirty days to respond to the Plaintiff’s arguments. After that the bankruptcy judge will have to face whether this question of notice supersedes the time lines demanded by the federal bankruptcy rules. If the court rules in the affirmative, then this Chapter 7 bankruptcy will illustrate that seemingly iron-clad time limitations are not so rigid when other prerogatives – such as the imperative of  actual notice – clash with the fairness of such rigidity.

In Albuquerque, Giddens & Gatton Law, PC has attorneys who offer expert handling of Chapter 7, Chapter 11, Chapter 12 and Chapter 13 bankruptcy cases. The firm represents many debtors and creditors in Albuquerque, Santa Fe, Taos, Raton, Farmington, Gallup, Grants, Roswell, Los Lunas, Placitas, Belen and the rest of New Mexico. Contact Giddens & Gatton Law, PC at (505) 633-6298 to set up an appointment or visit the firm’s website at giddenslaw.com. Giddens & Gatton Law, PC is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico.