Opinion
No. 77-1063-BK-CF-H
January 8, 1980
Former Bankruptcy Act — Unscheduled Debts — Amendment to Schedule of Creditors
In a no-asset case, a creditor must show real harm or design in order to have his debt declared non-dischargeable under Section 17a(3) of the Bankruptcy Act. Thus, since the creditor's allegation of fraud was dismissed in a companion case, and there was no genuine harm to the creditor in the bankrupt's omission of his debt from the original schedule of creditors, the bankrupt was entitled to a discharge. See Sec. 17(a)(3) at 2147 and Sec. 523(a)(3) at 9229.
[Digest of Opinion]
The creditor in this case was not listed on the original schedule of creditors accompanying bankrupt's voluntary petition in bankrutpcy filed August 15, 1977. However, in the accompanying statement of affairs, the creditor was listed as having a suit pending against the bankrupt in the Circuit Court. Further, the original notice to creditors dated August 26, 1977 stated that it was unnecessary for any creditor to file his claim insofar as it appeared from the bankrupt's schedules that there were no assets from which any dividend could be paid. On November 21, 1977, the bankrupt was discharged and the court entered an order closing the estate.
Subsequently, the estate was ordered reopened, an amendment to the bankrupt's schedule included the creditor, and the court issued a notice to creditors listing the creditors included in the bankrupt's amendment.
The creditor alleged that the bankrupt did not schedule his debt in time for proof and allowance, and that he did not receive notice or have actual knowledge of the bankruptcy proceeding. Accordingly, the debt should not be discharged in accordance with Bankruptcy Section 17(a)(3) of the Bankruptcy Act.
However, the court determined, that there must be a showing of real harm or design on the part of the bankrupt in order for the court to deprive him of a discharge. A mere procedural harm to the creditor is insufficient. The creditor's allegations of fraud in the concealment of assets was disspelled by the Court's ruling in a companion case that neither the creditors nor the trustee had any interest or claim in the trust which contained the alleged concealed assets. Further, there was no genuine harm to the creditor by its omission from the original schedule of creditors. Finally, the bankrupt effectively amended her schedules when the court reopened the estate. Consequently, the court held that this case distinguishes cases which have denied the amendment of schedules where it is too late for creditors to prove their claims. Accordingly, the creditor's debt was discharged.