Opinion
Case No. 2:99-cv-265-FtM-29DNF.
March 27, 2006
ORDER
This matter comes before the Court on the government's Motion for Default Judgment (Doc. #26), filed on February 23, 2006. This is an action by the plaintiff United States against defendant for recovery of a debt owed to plaintiff by defendant. On June 28, 2001, the Court administratively closed the case based on the government's Response (Doc. #14) indicating that defendant remained in Chapter 13 bankruptcy. On September 20, 2005, the government moved to reopen the case stating that the case had been fully administered and that the Chapter 13 case was closed on January 7, 2005. (Doc. #18). The same day, the Court entered an Order (Doc. #20) granting the motion to reopen, lifting the stay, and directing the government to notify the Court whether the unpaid balance had changed based on the Final Report and Accounting. Upon review of the response stating that $2,928.16 was still due and owing, the Court granted a renewed application for a default, Doc. #24, and a Clerk's Entry of Default (Doc. #25) was entered on September 29, 2005. Plaintiff has now filed, pursuant to Fed.R.Civ.P. 55(b)(1), the instant motion for entry of a default judgment. (Doc. #26).
The Process Receipt and Return (Doc. #5) indicates that personal service was made on July 27, 1999, at 6:00 P.M. by a Deputy U.S. Marshal.
The Complaint (Doc. #1) alleged that defendant owed $4,250.71 as of March 31, 1999, on Count One, and $5,484.48 as of March 31, 1999, on Count Two, plus interest and costs, for a total of $9,735.19. The Final Report and Account filed by the U.S. Trustee in defendant's Chapter 13 bankruptcy case establishes that the Department of Justice was paid the full amount of principal and interest in the amount of $9,735.19 allegedly due and owing in the Complaint on their unsecured debt, and that no balance was due and owing at the time of closure.
See attached.
In their request for judgment, the government states that although Count One was paid in full, $2,928.16 is still owing as of September 21, 2005, at a 7.30 percent per annum rate of interest. This date is post-closure of the Chapter 13 and after the full debt was paid. The government cited cases on September 22, 2005, arguing that post-petition interest continues to accrue on student loan debts during the pendency of the bankruptcy as justification why a claim still exists. Although it is true that interest accruing post-petition on a nondischargeable student loan is also nondischargeable, the cases cited by the government do not apply to this situation. An unsecured creditor who does not file a claim or seek payment of a nondischargeable debt during the pendency of the bankruptcy case can file a cause of action against the debtor post-petition or after the closure of the case and the interest continues to accrue during that time. In this case, the government did appear in the Bankruptcy Court, did file a claim, and did receive full payment of the nondischargeable debt including interest that had accrued.
See In re Ransom, 336 B.R. 790, 794 (B.A.P. 9th Cir. 2005); In re Gable, 311 B.R. 904 (Bankr. D. Kan. 2003); In re Kapsin, 265 B.R. 778, (Bankr. N.D. Ohio 2001) (denying a request to reopen a closed case to consider an "undue hardship" request).
The government has provided no supporting memorandum of law pursuant to Local Rule 3.01(a) as to why they are entitled to judgment, or an explanation as to how the $2,928.16 amount was reached or from where it arises. Therefore, it would appear that the case is due to be dismissed.
Accordingly, it is now
ORDERED:
1. The government's Motion for Default Judgment (Doc. #26) is DENIED.
2. The government shall show cause within ELEVEN (11) DAYS why this case should not be dismissed based on the full payment of the amounts alleged in the Complaint.
DONE AND ORDERED.