Opinion
22-30088 21-31391 21-31461 22-30121
03-29-2023
In the Matters of: Tanisha Lee Sexton, Jason Moore & Monica T. Glanders, Ericka Marie Young, Michael James Ramey & Hollee Joleen Ramey, Debtors.
Ch. 7
ORDER DENYING MOTIONS TO APPROVE STIPULATION OF DEBTORS AND TRUSTEE
Paul E. Singleton, U.S. Bankruptcy Judge
The parties' proposed stipulations are shortcuts. They are untimely and contradict the Bankruptcy Code and Rules. Further, the Court is not persuaded that the stipulations save the Court resources. The Court declines to accept the parties' agreements.
I. Facts
These cases have similar facts. The Chapter 7 Debtors owe money to their estates. No evidence suggests they are acting in bad faith or with fraud.
In each case, the Debtors received a discharge several months before the Chapter 7 Trustee filed proposed stipulations. The Chapter 7 Trustee filed motions to have the Court approve the stipulation between the Trustee and each Debtor. The Debtors acknowledge they have kept funds that belong to their Chapter 7 estates. The parties agree the Debtors should repay the estates in installments.
Sexton was discharged on 8/15/2022, with the stipulation filed 12/21/2022. Moore and Glanders were discharged 1/10/2022, with a stipulation filed 12/29/2022. Young was discharged 2/7/2022, and the stipulation was filed 12/6/2022. Ramey was discharged 5/31/2022, and the stipulation was filed 12/29/2022.
The stipulations cite 11 U.S.C. § 727(a)(10). The terms of the stipulations provide if the Debtors default on their installment payments, the Trustee is permitted to file an affidavit of default. The affidavit of default authorizes the Court to revoke discharge. Thus, upon default, the parties submit the Debtors waive their rights to require an adversary proceeding and acknowledge the debts listed in Schedule F will not be discharged. The amounts the Debtors owe to the estates and the amounts that will not be discharged are listed below.
Case Name
Amount owed to Estate
Amount discharged in Schedule F
Sexton, Case #: 22-30088
$83,724.00
Moore & Glanders, Case #: 21-31391
$6,000.00
$55,865.37
Young, Case #: 21-31461
$5,985.61
$80,123.00
Ramey, Case #: 22-30121
$4,308.00
$216,509.69
In Sexton's case, Debtor originally owed $5,755 but has paid $5,000 toward the balance due.
After reserving ruling on the Trustee's motions to approve stipulations, the Court ordered the parties to brief several issues, including whether the parties may revoke the discharge by a motion instead of an adversary proceeding. The Trustee and Ramey were the only parties who filed a brief. Ramey suggests that the agreements should be rewritten.
II. Jurisdiction & Venue
District courts have jurisdiction over cases arising out of Title 11. 28 U.S.C. § 1334(b). Bankruptcy courts are units of the district court and may hear all cases arising under Title 11, including core proceedings. 28 U.S.C. §§ 151 and 157. Core proceedings include the dischargeability of debts. Id. at § 157(b)(2)(I). In the Northern District of Indiana, the District Court refers bankruptcy cases to the Bankruptcy Court. N.D. Ind. L.R. 200-1(a). The Debtors reside in Warsaw, Elkhart, Marshall, and St. Joseph counties. This division is the appropriate venue for these cases. 28 U.S.C. § 94(a)(2); 28 U.S.C. § 1409.
III. Analysis
A. The proposed waivers of discharge should have been filed before the Court entered the orders of discharge.
The Court denies the parties motions because the waivers are untimely. Federal Rule of Bankruptcy Procedure 4004(c)(1) states upon the expiration of the time for objecting to discharge, "the court shall forthwith grant the discharge." The parties cite 11 U.S.C. § 727(a)(10). However, that provision applies after the order of relief but before discharge is entered. Section 727(a)(10) states, "the court shall grant the debtor a discharge, unless-the court approves a written waiver of discharge executed by the debtor after the order for relief under this chapter." 11 U.S.C. § 727(a)(10). Therefore, a court must approve the waiver before the court enters a discharge. In re Newton, 490 B.R. 126, 128 (Bankr. D.D.C. 2013). The "very structure of Section 727(a)(10) makes clear that the proposed 'waiver' of a discharge is forward-looking and must be presented to the Court before a discharge has been granted." Id. (citing In re Bailey, 220 B.R. 706, 710 (Bankr. M.D. Ga. 1998).
The order of relief is entered once a debtor files a petition. 11 U.S.C. § 301; Hatfield v. Providian (In re Hatfield), 354 B.R. 499, 502 (Bankr.N.D.Ohio 2006).
Here, in the cases before this Court, the Court already entered orders of discharge. Therefore, the proposed waivers of discharge are filed untimely. The Court declines to accept the stipulations.
B. Revocation of discharge requires an adversary proceeding.
To revoke a discharge, a party must file an adversary proceeding. Fed.R.Bankr.P. 7001(4) and (6). At least two bankruptcy courts decided that excepting a debt from discharge by wavier or stipulation is not appropriate. In re Maiers, No. 17-70869, 2017 WL 5033660 (Bankr. C.D. Ill. Oct. 31, 2017) (declining to sign the joint stipulation of the parties to except a debt from discharge when no adversary proceeding had been filed); In re Aubry, No. 2:13-BK-25295 RK, 2015 WL 5735204 (Bankr. C.D. Cal. Sept. 29, 2015) (disapproving of a "so-called 'Waiver of Chapter 7 Discharge'"). Here, no adversary proceedings have been filed. Accordingly, the motions should be denied.
C. The Court is not persuaded by the Trustee's argument that the stipulations save the Court's resources.
The Trustee argues the stipulations save the Court resources. They do not. Here, the parties agree the Debtors owe the estates. If they fail to repay the estates, the Trustee could still prosecute as a contested matter instead of an adversary proceeding. In re White, 389 B.R. 693, 699 (B.A.P. 9th Cir. 2008). The Trustee could have money judgments against the Debtors. Id. Under the circumstances, it seems the money judgments owed to the estates would be non-dischargeable.
Further, even if the stipulations required the Court to use additional resources, the Court would use additional resources. Shortcuts that attempt to save Court resources should not come at the expense of following the Bankruptcy Code and Rules. Therefore, the Court declines to approve of the parties' stipulations.
So ORDERED.