Mandatory Dismissal of Time-Barred Dischargeability Complaints Filed In Forma Pauperis

1. Introduction

In Colebrook v. Thompson (In re Thompson), the Bankruptcy Appellate Panel for the Sixth Circuit considered whether a bankruptcy court must dismiss a pro se creditor’s adversary complaint—filed in forma pauperis—under 28 U.S.C. § 1915(e)(2)(B)(ii) when the asserted claims are time-barred. Teena Colebrook, investing $35,000 in two real-estate projects through a Tennessee corporation, sued debtor John Preston Thompson for fraud and conspiracy after receiving only sporadic repayments. The bankruptcy court dismissed her complaint for failure to state a claim, concluding her claims were barred by statutes of limitations. On appeal, Colebrook challenged the sua sponte screening process, the refusal to grant leave to amend, the legal sufficiency of her claims, and alleged judicial bias.

2. Summary of the Judgment

The Panel affirmed the bankruptcy court’s dismissal. It held:

In Forma Pauperis Screening: Under 28 U.S.C. § 1915(e)(2)(B)(ii), a court must dismiss any IFP complaint that fails to state a claim upon which relief can be granted—without advance notice or hearing.
Statute of Limitations: Colebrook’s fraud and conspiracy claims were governed by three-year limitations periods under Tennessee and California law. Inquiry notice of her injury arose by 2013–15, and she did not sue until 2024.
No Tolling or Revival: She alleged no facts justifying tolling, and sporadic payments did not revive her stale claims.
Failure to State a § 523 Debt: Without an enforceable obligation against Thompson (the contracts were with the corporation), no dischargeability “debt” existed.
No Judicial Error or Bias: The court properly applied § 1915(e) screening and Rule 12(b)(6) standards to a pro se complaint.

3. Analysis

3.1 Precedents Cited

Hill v. Lappin, 630 F.3d 468 (6th Cir. 2010) – IFP complaints are screened under Rule 12(b)(6) standards.
28 U.S.C. § 1915(e)(2)(B)(ii) – Mandatory dismissal for failure to state a claim.
Ritzen Grp., Inc. v. Jackson Masonry, LLC, 589 U.S. 35 (2020) – Finality of bankruptcy orders.
Bullard v. Blue Hills Bank, 575 U.S. 496 (2015) – Definition of “final” in bankruptcy appeals.
Thompson v. Roland (In re Roland), 294 B.R. 244 (Bankr. S.D.N.Y. 2003) – No “debt” without enforceable obligation.
Tennessee Code Ann. § 28-3-105(1) & Cal. Civ. Proc. Code § 338(d) – Three-year statutes of limitations for fraud and conspiracy.

3.2 Legal Reasoning

The Panel applied a de novo standard to the court’s dismissal under § 1915(e)(2)(B)(ii). Key points:

IFP Screening: Once a filing fee is waived, § 1915(e)(2)(B) compels sua sponte review of the complaint’s legal sufficiency. No notice or opportunity to amend is required when amendment would plainly be futile.
Rule 12(b)(6) Standards: Accepting all well-pleaded facts as true, a complaint must allege enough facts to make relief plausible, not merely recite statutory labels.
§ 523 Dischargeability: A nondischargeable debt requires an enforceable prepetition obligation. Colebrook’s contracts named the corporation, not Thompson, and no veil-piercing theory was pleaded.
Statutes of Limitations: Under both Tennessee and California law, fraud and conspiracy claims must be filed within three years of discovery of the injury or last overt act. Colebrook was on inquiry notice by mid-2015 at the latest; her 2024 complaint was too late.
Tolling/Revival: No facts supported statutory tolling or equitable tolling. Intermittent payments did not revive the debt.

3.3 Impact

This decision clarifies that:

Bankruptcy courts must diligently screen IFP adversary complaints and lack discretion to excuse time-barred claims.
Pro se litigants must still plead timely causes of action under applicable state law.
Listing a debt in a bankruptcy petition does not revive a stale claim barred by statute of limitations.
Creditors should confirm enforceable obligations against individual debtors before seeking nondischargeability.

4. Complex Concepts Simplified

In Forma Pauperis (IFP): Permission to sue without paying filing fees, granted based on inability to pay.
28 U.S.C. § 1915(e)(2)(B)(ii): Requires courts to dismiss IFP civil actions that fail to state a plausible claim.
Rule 12(b)(6): Federal Rule of Civil Procedure that allows dismissal when the complaint does not allege enough facts to make relief plausible.
Statute of Limitations: Time limit for bringing a lawsuit. For fraud in Tennessee and California, it is three years from discovery of the injury.
Inquiry Notice: When a reasonable person should suspect they have been harmed by wrongdoing, triggering the limitations period.
§ 523 Dischargeability: Certain debts (e.g., fraud) can be excepted from bankruptcy discharge but must be based on enforceable obligations and timely lawsuits.

5. Conclusion

Colebrook v. Thompson underscores the mandatory nature of screening in forma pauperis complaints under 28 U.S.C. § 1915(e)(2)(B)(ii) and the critical importance of filing dischargeability and fraud-based adversary proceedings within applicable statutes of limitations. Pro se creditors must identify individual debtors and timely plead all elements of a cause of action. Bankruptcy courts lack discretion to overlook stale claims, ensuring efficient case management and protecting debtors from unexpected late-filed adversary actions.