Opinion
No. B-3-77-158
May 4, 1979
Bankrupt — Relief from Judgment — Equity Power of Court
A bankrupt's motion for relief from a judgment denying discharge was granted under the court's equitable power to do justice, where the bankrupt had been "victimized" and hospitalized by drug dependence during the period when the judgment was issued.
As a result of the first meeting of creditors, the court ordered that the bankrupt turn over a certain assest to the trustee which had been claimed exempt. When the asset was not turned over, the bankrupt was ordered to appear in court for a Rule 205 examination. Subsequent to the first meeting of creditors, the bankrupt had been hospitalized and had undergone a detoxification program to rid himself of his strong dependency on drugs. He did not remember receiving letters from his attorney or various court notices. The court had issued a directive order for the bankrupt to participate in family and financial counseling services which the bankrupt failed to participate in. When the bankrupt did not appear in court for his Rule 205 examination, judgment was entered denying discharge for failure to appear and for failure to surrender assets of the estate. Almost one year following the issuance of the judgment denying discharge, the bankrupt sought relief from the judgment and to reopen the bankruptcy case under Rule 924 of the Rules of Bankruptcy Procedure.
Rule 60 of the Federal Rules of Civil Procedure is made applicable in bankruptcy cases where relief from judgment is sought, under Rule 924 of the Bankruptcy Rules of Procedure. F.R.C.P. 60(b)(1) provides relief from a judgment if the bankrupt's failure to appear at the examination was attributable to "excusable neglect". The court held that the facts in this matter did not sustain the claim of "excusable neglect". However, the court provided the relief requested by the bankrupt under F.R.C.P. 60(b)(6) which gives relief from a judgment for "any other reason justifying the operation of the judgment." The court stated that its function was "to recognize the cultural and human impacts [of drug abuse] and the intimate relevance to treating the whole man for a new start in life." Recognizing that during the time span of the proceedings giving rise to the order denying a discharge, the bankrupt was "victimized and hospitalized by his insidious drug dependence", the court held that justice would be done by reopening administration of the bankruptcy proceedings and setting aside the order denying discharge. See Rule 924 at ¶ 20,354.