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In re: MARY LOUISE BOND O'BERRY, Chapter 7, Debtor

MEMORANDUM OPINION

STEPHEN MITCHELL, Bankruptcy Judge

This matter is before the court on the motion filed by McCormack Design, Inc., a judgment creditor, on June 27, 1997, seeking to examine the debtor under Federal Rule of Bankruptcy Procedure 2004, and on the debtor's opposition filed July 9, 1997. Pursuant to Local Rule 9013-1(L), the court determines that oral argument is not necessary as the issues are adequately set forth in the motion papers and opposition.

The judgment of March 18, 1997, entered by the Circuit Court of Fairfax County, Virginia, in McCormack Design, Inc. v. Berry, At Law No. 148277, awarded McCormack Design, Inc. a total of $681,000.00 in compensatory and punitive damages against the debtor for tortious interference with prospective contractual relations and common law conspiracy and awarded the debtor $32,000 on her counterclaim for breach of contract. The debtor has appealed the judgment to the Virginia Supreme Court.

The debtor's argument is that the moving creditor has filed an objection to the debtor's claim of exemptions as well as a complaint to determine dischargeability; that the moving creditor "is now time-barred from initiating any additional contested matters or adversary proceedings for which the inquiry sought in the Rule 2004 examination would be relevant" and that it is not appropriate to allow a party to make use of the broad discovery available under Rule 2004 to circumvent the limitations that would apply to discovery conducted under Federal Rule of Bankruptcy Procedure 7026.

As has the chapter 7 trustee.

While I agree with the cases cited by the debtor that parties should not be permitted to use Rule 2004 solely or primarily to obtain discovery for use in other litigation, looking to the documents requested it does not appear that the discovery sought would exceed that which the moving creditor would be entitled to obtain under Rule 7026 in connection with its pending dischargeability complaint and objection to the debtor's claim of exemptions. Additionally, even though the creditor has initiated an adversary proceeding and a contested matter, it by no means follows that it has no other interest in determining what assets might be available to satisfy its claim. If, as a result of information learned during such examination, it uncovers non-exempt assets, it can make that information available to the trustee. Additionally, even though the time for filing an objection to the debtor's discharge has now expired, the moving creditor is not yet time-barred from bringing a complaint under § 727(d) to revoke the debtor's discharge.

For example, the debtor's schedules reflect that a retainer of $20,000 was paid to her bankruptcy counsel. To the extent not earned as of the filing date, such retainer would constitute property of the bankruptcy estate.

The deadline was July 7, 1997.

For the foregoing reasons, I conclude that an examination of the debtor under Rule 2004 is appropriate notwithstanding the pendency of the adversary proceeding and the contested matter. A separate order will be entered authorizing such examination.

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IN RE O'BERRY, (Bankr.E.D.Va. 1997)
(Jul 9, 1997)