General Electric Credit Corp. v. Watts (In Re Watts)

59 B.R. 779, 1986 Bankr. LEXIS 6270
CourtUnited States Bankruptcy Court, N.D. Alabama
DecidedApril 14, 1986
Docket19-70172
StatusPublished
Cited by3 cases

This text of 59 B.R. 779 (General Electric Credit Corp. v. Watts (In Re Watts)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. Alabama primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
General Electric Credit Corp. v. Watts (In Re Watts), 59 B.R. 779, 1986 Bankr. LEXIS 6270 (Ala. 1986).

Opinion

MEMORANDUM OPINION AND ORDER ON MOTION TO DISMISS

L. CHANDLER WATSON, Jr., Bankruptcy Judge.

The above-styled adversary proceeding came before the Court for a pre-trial conference and upon the motion of the debtor to dismiss the complaint to determine dis-chargeability of a debt under 11 U.S.C. § 523(c) as being untimely filed and for failure to state a claim upon which relief may be granted.

On October 5, 1984, the debtor filed a voluntary petition commencing a case under chapter 11, title 11, United States Code. The clerk gave notice that November 19, 1984, was the date set for the first meeting of creditors held pursuant to 11 U.S.C. § 341(a) and of the time fixed to file complaints under 11 U.S.C. § 523(c). No complaint to determine dischargeability of debt under 11 U.S.C. § 523(c) was filed by the plaintiff herein within the time then fixed as provided by Bankruptcy Rule 4007(c).

By action of the debtor, the case was converted to a case under chapter 7, title 11, United States Code, on August 9, 1985, and the clerk again gave notice of the date set for the first meeting of creditors to be held pursuant to 11 U.S.C. § 341(a) in the converted chapter 7 case. In the second notice the clerk set November 18, 1985, as the last day to file a complaint under 11 U.S.C. § 523(c), such date being 60 days following the first date set for the meeting of creditors held pursuant to 11 U.S.C. § 341(a) in the converted chapter 7 case.

The issue here is whether the time for filing a complaint under 11 U.S.C. § 523(c) runs from the date set for the first meeting of creditors in the chapter 11 case, or from the date set for the first meeting of creditors in the converted chapter 7 case. Judging from the number of case citations concerning Bankruptcy Rule 4007(c), the time constraints imposed by the Rule have proven to be a trap for the unwary and the indolent. There are decisions from other districts on the issue herein, but the Court was not directed to a controlling decision on the issue, nor was one located by the Court.

In F & M Marquette Nat’l. Bank v. Richards, 47 B.R. 423, 425 (D.Minn.1985), the district court ruled emphatically on appeal of companion cases that:

BANKRUPTCY RULE 4007(c) REQUIRES THE FILING OF OBJECTIONS TO DISCHARGEABILITY UNDER § 523(a)(2) WITHIN SIXTY DAYS OF THE VERY FIRST MEETING OF CREDITORS IN A BANKRUPTCY ACTION, REGARDLESS OF WHETHER THAT CASE IS LATER CONVERTED UNDER A DIFFERENT BANKRUPTCY CHAPTER TO A CASE IN WHICH A MEETING OF CREDITORS MAY OR MAY NOT BE REQUIRED.

In affirming the bankruptcy court in the Richards case, the district court relied on the decision of Judge O’Brien in In re Richards, 43 B.R. 554 (Bkrtcy.Minn.1984). *781 Judge O’Brien based his decision on an interpretation of 11 U.S.C. § 341 and § 348. Judge O’Brien stated:

The meeting [of creditors in the converted case] was not made necessary by § 341(a), since the date of the order for relief for purposes of that section remained the same as in the superseded case — i.e., the date of the chapter 11 petition. Consequently, the requirement of § 341(a) for a meeting of creditors remained satisfied after the conversion. 43 B.R. at 558.

To follow Judge O’Brien’s reasoning to its logical conclusion, the meeting of creditors held in the converted case was not “held pursuant to § 341(a)” as provided in Bankruptcy Rule 4007(c). Accordingly, the time for filing complaints under 11 U.S.C. § 523(c) was not revived by the scheduling of a meeting of creditors (whether labeled first or second) in the converted case. 43 B.R. at 558.

An opposing viewpoint is offered by Judge DeGunther in In re Cail, 41. B.R. 795 (Bkrtcy.N.D.Ill.1984) and by Judge Bo-hanon in In re Kellogg, 41 B.R. 836 (Bkrtcy.W.D.Okla.1984). In Cail, Judge DeGunther held that:

Following conversion to Chapter 7, a new Section 341(a) meeting under Chapter 7 is scheduled. This meeting is not a continuance of the original Section 341(a) meeting under Chapter 11. It is a fresh Section 341(a) meeting under Chapter 7, with a newly appointed Chapter 7 Interim Trustee presiding.... Therefore, upon conversion from Chapter 11 to Chapter 7, Rule 4007(c) requires a new notice of time to file a Complaint to Determine Dischargeability, and a renewed opportunity for creditors to so file. 41 B.R. at 796.

In Kellogg, Judge Bohanon relied on Bankruptcy Rule 1019 in holding that a motion for extension of time to object to the debtor’s discharge or to determine dis-chargeability of a debt under 11 U.S.C. § 523(c) was timely under Bankruptcy Rules 4004(a) and 4007(c) when made within 60 days following the first date set for the meeting of creditors subsequent to conversion. 41 B.R. 837. Bankruptcy Rule 1019 requires, at least implicitly, a new meeting of creditors in a case converted to chapter 7.

Judges DeGunther and Bohanon further reason that complaints for determination of dischargeability may be purposefully foregone in chapter 11 reorganization cases. Cail, 41 B.R. at 796; Kellogg, 41 B.R. at 837-38. Judge O’Brien contends that there is no compelling reason why a creditor who elects not to file such a complaint in a chapter 11 proceeding should be afforded a second chance upon conversion to chapter 7. Richards, 43 B.R. at 560.

Regardless of the folly involved in not filing a complaint to determine discharge-ability of a debt or a motion for extension of time in which to do so in the 60 days following the first date set for the meeting of creditors in a chapter 11 case, this Court is inclined to follow the reasoning of Judges DeGunther and Bohanon. It is not atypical in chapter 11 cases for creditors early in such cases to be presented with a blossom of hope of future payment sufficient to forestall what is perceived as a costly and useless adversary proceeding. Further, in this division of this district a chapter 11 discharge is as rare as hens’ teeth, making complaints to determine dis-chargeability of debts meaningless in the context of most chapter 11 cases.

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59 B.R. 779, 1986 Bankr. LEXIS 6270, Counsel Stack Legal Research, https://law.counselstack.com/opinion/general-electric-credit-corp-v-watts-in-re-watts-alnb-1986.