§523(a)(7) and §523(a)(19) \ §523(a)(19)(b)(iii) used in the same case?
We had just finished a three year litigation battle with a state regulatory agency. We won the discharge on the restitution portion of a debt under §523(a)(19) and §523(a)(19)(b)(iii). However, we were not so lucky under the penalty portion of the debt under §523(a)(7).
We are preparing to file an appeal after a ruling from a bankruptcy court who allowed a creditor to make argument to re-litigate their same claims under a bankruptcy provision of §523(a)(7) after this same bankruptcy court ruled the creditors original argument were inapplicable and discharged under §523(a)(19) and §523(a)(19)(b)(iii).
The question the court asked if there are any published case law that allow or disallow a court to allow a creditor to bring a secondary bankruptcy provision in the same case after the case had already been ruled?
In the summary judgment motion prepared by the creditor within the re-litigation they admitted there are no published case law that shows a case has ever used §523(a)(7) after §523(a)(19) and §523(a)(19)(b)(iii) had been ruled inapplicable and discharged. The Debtors agree with their research that there are no publish cases that allows any penalty provision of §523(a)(7) to come in an scoop up the "very same penalties".
The court however felt like the case law of Sherman gave the SEC the advice through a panel which said the SEC had more tools available to them than simply §523(a)(19) referring to §523(a)(7) if it was litigated outside of the bankruptcy court. Please note that the Sherman case never used §523(a)(7) and the SEC lost their case with their §523(a)(19) argument. The Sherman case went all the way to the ninth circuit court of appeals. If the SEC had the option to use §523(a)(7) after they lost their case, don't you think they would have done so? In the case at hand there was no court hearing or trial outside of the bankruptcy court.
The court also referenced the McClung case which in the McClung court their original question was if the creditor who was an state regulatory agency was considered to be a creditor by status. Their court gave an answer to their question; which was, yes, and their court said the creditor had all rights to use any provision under §523(a)? However, that does not mean that the state regulatory agency had the right to bring a §523(a)(7) claim after the court ruled §523(a)(19)(b)(iii) inapplicable. In the McClung court when the court answered their original question no claims had been filed.
Keep in mind we are not arguing the combination of multiple bankruptcy provisions being used at the beginning of a case. §523(a)(2),(a)(4), and (a)(6) are often combined with §523(a)(7). However, §523(a)(19) \ §523(a)(19)(b)(iii) have never been combined with §523(a)(7) in the same case. So looking at the behavior of case law studies it shows it cannot be done. The question is if there is case law out there that says it cannot be done? We are looking for such case law.
Here is the problem the court looked at these two above cases and said did the creditor have the option to use §523(a)(7) and §523(a)(19) together. – We feel that the court made an manifest error of law because the court was not looking at the question did they have the option to bring §523(a)(7) and §523(a)(19) together after the judge ruled after §523(a)(19) and §523(a)(19)(b)(iii) were ruled inapplicable.
Should the court have given the creditor a second byte at the apple and allowed litigation under a different provision of the law?
To be clear we want to debate:
Is there case law that prevents a creditor from using §523(a)(7) after §523(a)(19) and §523(a)(19)(b)(iii) have been ruled discharged?
Is there case law that clearly states a court cannot make one provision of the bankruptcy code meaningless by first ruling one penalty provision §523(a)(19)(b)(iii) inapplicable and then using another penalty provision (a)(7) to be non-dischargeable. This court made the first provision of §523(a)(19)(b)(iii) meaningless because he ignored his own ruling and opened the door to another penalty provision but is there case law that says the court is not allowed to do this?
Any help would be appreciated.
We are preparing to file an appeal after a ruling from a bankruptcy court who allowed a creditor to make argument to re-litigate their same claims under a bankruptcy provision of §523(a)(7) after this same bankruptcy court ruled the creditors original argument were inapplicable and discharged under §523(a)(19) and §523(a)(19)(b)(iii).
The question the court asked if there are any published case law that allow or disallow a court to allow a creditor to bring a secondary bankruptcy provision in the same case after the case had already been ruled?
In the summary judgment motion prepared by the creditor within the re-litigation they admitted there are no published case law that shows a case has ever used §523(a)(7) after §523(a)(19) and §523(a)(19)(b)(iii) had been ruled inapplicable and discharged. The Debtors agree with their research that there are no publish cases that allows any penalty provision of §523(a)(7) to come in an scoop up the "very same penalties".
The court however felt like the case law of Sherman gave the SEC the advice through a panel which said the SEC had more tools available to them than simply §523(a)(19) referring to §523(a)(7) if it was litigated outside of the bankruptcy court. Please note that the Sherman case never used §523(a)(7) and the SEC lost their case with their §523(a)(19) argument. The Sherman case went all the way to the ninth circuit court of appeals. If the SEC had the option to use §523(a)(7) after they lost their case, don't you think they would have done so? In the case at hand there was no court hearing or trial outside of the bankruptcy court.
The court also referenced the McClung case which in the McClung court their original question was if the creditor who was an state regulatory agency was considered to be a creditor by status. Their court gave an answer to their question; which was, yes, and their court said the creditor had all rights to use any provision under §523(a)? However, that does not mean that the state regulatory agency had the right to bring a §523(a)(7) claim after the court ruled §523(a)(19)(b)(iii) inapplicable. In the McClung court when the court answered their original question no claims had been filed.
Keep in mind we are not arguing the combination of multiple bankruptcy provisions being used at the beginning of a case. §523(a)(2),(a)(4), and (a)(6) are often combined with §523(a)(7). However, §523(a)(19) \ §523(a)(19)(b)(iii) have never been combined with §523(a)(7) in the same case. So looking at the behavior of case law studies it shows it cannot be done. The question is if there is case law out there that says it cannot be done? We are looking for such case law.
Here is the problem the court looked at these two above cases and said did the creditor have the option to use §523(a)(7) and §523(a)(19) together. – We feel that the court made an manifest error of law because the court was not looking at the question did they have the option to bring §523(a)(7) and §523(a)(19) together after the judge ruled after §523(a)(19) and §523(a)(19)(b)(iii) were ruled inapplicable.
Should the court have given the creditor a second byte at the apple and allowed litigation under a different provision of the law?
To be clear we want to debate:
Is there case law that prevents a creditor from using §523(a)(7) after §523(a)(19) and §523(a)(19)(b)(iii) have been ruled discharged?
Is there case law that clearly states a court cannot make one provision of the bankruptcy code meaningless by first ruling one penalty provision §523(a)(19)(b)(iii) inapplicable and then using another penalty provision (a)(7) to be non-dischargeable. This court made the first provision of §523(a)(19)(b)(iii) meaningless because he ignored his own ruling and opened the door to another penalty provision but is there case law that says the court is not allowed to do this?
Any help would be appreciated.
Bankruptcy Wizard
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