Thursday, July 25, 2013

7-25-13 - Ninth Circuit Decision Re: Time Frame to File Nondischargeability Complaint

In Willms v. Sanderson, the 9th Circuit court held that the Bankruptcy Judge erred in sua sponte extending the time for a creditor to file a nondischargeability complaint without showing or finding cause.

In the Nevada jurisdiction, it has been common place for creditors to file a quick and easy motion to extend the time to object to the discharge of the debtor.  These motions are typically and routinely granted.  I have always been concerned about such approach because a creditor must show cause to extend.

The 9th Circuit went through the applicable case law under 11 USC 523(c) and Rule 4007(c).  The Court once again reiterated that cause must be shown to extend such time frame.  In this case, the creditor filed a two page motion which did not provide notice that they intended to have a specific debt declared nondischargeable.    Apparently it was the Bankruptcy Court that first suggested that the motion could be construed as a request to extend the 523(c) deadline.  The Court found that Bankruptcy Court erred and remanded with instructions.

With that said, if you are going to file a motion, make sure you have support and a good reason why "cause" that the time should be extended.  With our two new judges taking the bench, I got a feeling that they will strictly construe such obligation.

Willms v. Sanderson

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