IN RE PARKER, (Bankr.E.D.Va. 1985)

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Docket Number

Bankruptcy No. 84-01686-N. APN 85-0036-N.

Attorney(S)

Charles M. Lollar, Norfolk, Va., for plaintiff. Tom C. Smith, Norfolk, Va., for defendants.

Acts

Bankruptcy — Liquidation — Collection, Liquidation, And Distribution Of The Estate — Discharge
Bankruptcy — Creditors, The Debtor, And The Estate — Debtor’S Duties And Benefits — Exceptions To Discharge
Bankruptcy — General Provisions — Applicability Of Chapters
Bankruptcy — Adjustment Of Debts Of An Individual With Regular Income — The Plan — Discharge

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Smart Summary

Factual and Procedural Background

The plaintiff, Eastern Wrecker Sales, Inc., filed a Complaint objecting to the discharge of the debtor-defendants, John Christopher Parker t/a John's Towing Service and Matilda Elizabeth Parker, pursuant to 11 U.S.C. § 727(a)(2) (intent to hinder, delay, or defraud a creditor). In the alternative, the plaintiff sought a determination of non-dischargeability under 11 U.S.C. § 523. The bankruptcy matter is a Chapter 13 case. The plaintiff also filed an objection to confirmation of the debtors' Chapter 13 plan but failed to appear at the Confirmation Hearing on January 24, 1985; the objection was overruled for failure to prosecute. The court dismissed the Complaint with prejudice and ordered that copies of the Order be forwarded to counsel and the debtors.

Legal Issues Presented

Whether a creditor may object to a debtor's discharge under 11 U.S.C. § 727 in a Chapter 13 case.
Whether 11 U.S.C. § 1328 provides a basis for determining the non-dischargeability of a debt in a Chapter 13 case.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
In re Bonder, 3 B.R. 623 (Bankr.E.D.N.Y. 1980)	Support for the proposition that § 727 does not apply in Chapter 13 cases and a creditor may not utilize § 727 to object to discharge.	Cited as part of a group of unanimous cases supporting the court's conclusion that § 727 is inapplicable to Chapter 13.
In re Meltzer, 11 B.R. 624 (Bankr.E.D.N.Y. 1981)	Support for the proposition that § 727 does not apply in Chapter 13 cases and a creditor may not utilize § 727 to object to discharge.	Cited as part of a group of unanimous cases supporting the court's conclusion that § 727 is inapplicable to Chapter 13.
Matter of Ponteri, 31 B.R. 859 (Bankr.D.New Jersey 1983)	Support for the proposition that § 727 does not apply in Chapter 13 cases and that objections to discharge under § 727 are improper in Chapter 13; discusses alternative remedy via objection to plan confirmation (good faith).	Cited both for the rule that § 727 is inapplicable and for the principle that objections to plan confirmation address good faith; the court noted Ponteri's discussion of confirmation objections.
In the Matter of Stuart, 31 B.R. 18 (Bankr.D.Connecticut 1983)	Support for the proposition that § 727 does not apply in Chapter 13 cases and a creditor may not utilize § 727 to object to discharge.	Cited as part of a group of unanimous cases supporting the court's conclusion that § 727 is inapplicable to Chapter 13.

Court's Reasoning and Analysis

The court began by identifying the plaintiff's claims: an objection to discharge under 11 U.S.C. § 727(a)(2) and an alternative claim for nondischargeability under 11 U.S.C. § 523. Noting that this is a Chapter 13 case, the court posed the threshold issue whether a creditor may object to discharge under § 727 in Chapter 13. The court answered no, observing that § 727 is part of Subchapter II of chapter 7 and that 11 U.S.C. § 103(b) provides that Subchapters I and II of chapter 7 apply only in a case under that chapter. The court found no contrary authority and cited a series of cases (In re Bonder; In re Meltzer; Matter of Ponteri; In the Matter of Stuart) that uniformly support the conclusion that creditors may not utilize § 727 in Chapter 13 cases. The court also determined that 11 U.S.C. § 1328 does not provide grounds for a determination of non-dischargeability of the plaintiff's debt. The opinion explained that a creditor's appropriate remedy in Chapter 13 is an objection to plan confirmation on grounds such as lack of good faith; the court noted that the plaintiff had filed such an objection but failed to appear at the confirmation hearing, resulting in overruling for failure to prosecute. Based on these legal principles and the plaintiff's failure to pursue the confirmation objection, the court concluded dismissal was appropriate.

Holding and Implications

DISMISSED WITH PREJUDICE.

Direct effect: The Complaint objecting to discharge and seeking a determination of non-dischargeability was dismissed with prejudice. The plaintiff's available remedy (objection to confirmation on good faith grounds) was not pursued at the confirmation hearing and was effectively abandoned. The opinion does not announce a new legal precedent beyond applying existing statutory interpretation and cited authorities.

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In re John Christopher PARKER t/a John's Towing Ser v. ce and Matilda Elizabeth Parker, Debtors. EASTERN WRECKER SALES, INC., Plaintiff,

ORDER

HAL J. BONNEY, Jr., Bankruptcy Judge.

The plaintiff filed a Complaint objecting to the discharge of the defendant-debtor pursuant to one of the grounds of 11 U.S.C. § 727(a)(2). This pertains to the intent to hinder, delay, or defraud a creditor. In the alternative, the plaintiff sued for a determination of the non-dischargeability of the defendants' debt to it under 11 U.S.C. § 523.

Most significant of all is the fact that this is a Chapter 13 case under Title 11 of the United States Code.

There is a threshold legal issue of whether one may, in a Chapter 13 case, object to the discharge of a debtor at all. The answer is clearly no. Indeed, the provisions of § 727 do not apply to Chapter 13 cases. 11 U.S.C. § 103(b) says:

(b) Subchapters I and II of chapter 7 of this title apply only in a case under such chapter.

727 is a part of Subchapter II. I find no case law to the contrary, but rather some clear, well-reasoned cases which present a unanimous position on this. In essence, a creditor may not utilize § 727 in objecting to the discharge of a debtor. In re Bonder, 3 B.R. 623 (Bankr.E.D.N.Y. 1980); In re Meltzer, 11 B.R. 624 (Bankr.E.D.N.Y. 1981); Matter of Ponteri, 31 B.R. 859 (Bankr.D.New Jersey 1983); In the Matter of Stuart, 31 B.R. 18 (Bankr.D.Connecticut 1983).

Further, no grounds for a cause of action exist under 11 U.S.C. § 1328 for the determination of the non-dischargeability of such a debt.

One should not hastily conclude that a creditor, then, has no remedy in a Chapter 13 case when he has been wronged. This is far from the truth. The issue of "good faith" can be raised by an objection to the confirmation of the Chapter 13 plan. This is set forth well by Judge Lipkin in the Ponteri case, supra. Interestingly, the plaintiff here, Eastern Wrecker, filed an objection to the confirmation of this debtors' plan, but failed to appear at the Confirmation Hearing on January 24, 1985, to prosecute this. The objection was, of course, overruled for failure to prosecute. Clearly, the plaintiff abandoned the remedy that it had in this case.

It is ORDERED that the Complaint in this proceeding be, and it is hereby, DISMISSED with prejudice.

It is FURTHER ORDERED that a copy of this Order be forwarded to Charles M. Lollar, Esquire, Attorney for the plaintiff; Tom C. Smith, Esquire, Attorney for the defendants and to John Christopher Parker, t/a John's Towing Service and Matilda Elizabeth Parker, debtors.