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Potential tort currently stale and 'forever exempt' concept

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  • Potential tort currently stale and 'forever exempt' concept

    Suppose potential tort which is currently stale (beyond the statute of limitations probably everywhere that matters) is listed as a chapter 7 unsecured claim. In a way it looks like if the entity that has the claim does not come forward and both attempt to prove their claim and dispute its discharge due to 'willful and malicious behavior' it will be discharged. Another reading of 727(b) suggests it would not be discharged even without any action to prove the claim. Which is it ? Further even if its not discharged I have read briefly of the concept of exemptions being 'forever exempt' against unsecured claims listed in bankruptcy. Could it be that whether 0 (stale everywhere) or a small amount (stale almost everywhere) is allowed and estimated by the trustee, that exemptions would be 'forever exempt' and due to the 0/small amounts, little reason to void both >2 and less than 2 year exemption planning (and therefore protected from a potential future change of law making claims not stale) ?

    Let me add that general jurisdiction/potential filing state at issue is a state where there is a 'right to payment' for stale claims and I am aware of the recent supreme court decision where filing a proof of claim for a stale claim in such a state was not 'improper' even potentially beneficial as it could be discharged MIDLAND FUNDING, LLC v. JOHNSON 2017
    Last edited by James123; 11-23-2017, 01:38 PM.

  • #2
    The bankruptcy code is quite clear. All debts that arose before the filing of the action, and not excepted from discharged under 11 USC 523, are in fact discharged (period). So long as you scheduled the debt and the creditor had notice, the debt is discharged.

    So, given what I wrote, I don't know what you are trying to convey. It's simple in bankruptcy; all debts are discharged (period). Secured debts may have an in rem claim against property, but never against the person (in personam).
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog


    I am not an attorney. Any advice provided is not legal advice.

    Comment


    • #3
      Thanks justbroke. Let me simplify and clarify the best I can. Suppose the potential place of wrong, place of assets, place of filing bankruptcy are all the same state where such potential claim is currently stale. However in the future after bankruptcy the procedural law may change. Please consider the following scenarios:
      (1) Potential Claim listed and no proof of claim filed nor is its discharge challenged. After bankruptcy closes, the statue of limitations increases and the person makes the claim as an intentional tort with 'wilful and malicious behavior' (ie would have fallen under 11 USC 523) which should not have been discharged. Any chance this would succeed ?
      (1) Potential Claim listed and proof of claim and dispute of discharged is filed. The trustee disallows it per 502(b)(1) as its stale and there is not much else debt. However that claimant makes the case that the claim may not be stale in the future so 'recent' transfers from non exempt to exempt assets should still be voided as much as possible. Would the trustee likely do such voiding for such a claim or not ? If not, would a potential future bankruptcy or state action due to such revived claim have access to such assets ?

      Comment


      • #4
        I don't like the theoretical so much unless someone is talking academically about an outcome. Bankruptcy is mostly cut and dry. But, I'll play your game.

        Originally posted by James123 View Post
        (1) Potential Claim listed and no proof of claim filed nor is its discharge challenged. After bankruptcy closes, the statue of limitations increases and the person makes the claim as an intentional tort with 'wilful and malicious behavior' (ie would have fallen under 11 USC 523) which should not have been discharged. Any chance this would succeed ?
        If it falls under 11 USC 523 (Exceptions to Discharge), it falls under 523 (period). Filing a proof of claim in a bankruptcy doesn't remove the fact that there is a claim. There are some creditors that don't file a proof of claim because they don't want the bankruptcy court to take jurisdiction. Regardless of the claim, the bankruptcy code controls whether that claim (whether or not reduced to a judgement) is discharged.

        There is a mechanism within the bankruptcy to make these determinations and that's called a Complaint to Determine Dischargeability. A debtor may be smart to pre-empt these claims by filing such a complaint during the bankruptcy to have some finality. Wilful and malicious is hard to prove.

        In fact, bankruptcy is to give a debtor finality of claims. It is not so that you could have claims hanging over your head and the creditor comes later to collect. A creditor, that was scheduled and noticed in a bankruptcy, would be wise to go back to the bankruptcy court to determine whether the claim was discharged, prior to filing any new State court action.

        Originally posted by James123 View Post
        (1) Potential Claim listed and proof of claim and dispute of discharged is filed. The trustee disallows it per 502(b)(1) as its stale and there is not much else debt. However that claimant makes the case that the claim may not be stale in the future so 'recent' transfers from non exempt to exempt assets should still be voided as much as possible. Would the trustee likely do such voiding for such a claim or not ? If not, would a potential future bankruptcy or state action due to such revived claim have access to such assets ?
        Again, bankruptcy gives finality. You can't go back and argue a discharged claim except to ask the court whether the debt was in fact discharged.

        That's the problem with the theoretical in that bankruptcy gives finality. If someone tried to rise an issue on a stale and otherwise discharged (and/or dischargeable) claim, I will drag them into the bankruptcy court on a show cause hearing for a discharge injunction violation. That way, the claimant (creditor) can explain to the judge how they have theoretically tried to circumvent the bankruptcy code.

        The Trustee usually doesn't deal with 502 disallowance (claim disallowance actions) unless it's against "property of the Estate" which the Trustee is trying to administer. In other words, you hardly see anything even remotely like this unless it's impacting the trustee's ability to liquidate an estate. Compounding this, about 95% of cases are no-asset, so this is a very limited case to start. In my Chapter 7, I filed a 502(b) motion myself against a creditor that did not properly title an asset. The Trustee couldn't have cared less.

        My question for you is... what are you trying to prove or disprove? Academic and theoretical questions serve no practical purpose unless, maybe, you're in law school and taking a torts class and the question of bankruptcy discharges arose.
        Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
        Status: (Auto) Discharged and Closed! 5/10
        Visit My BKForum Blog: justbroke's Blog


        I am not an attorney. Any advice provided is not legal advice.

        Comment


        • #5
          justbroke I appreciate your response. Unfortunately I am talking about a real life possibility. In short someone may possibly claim (maybe 50/50) a tort an against me if the statute of limitations changes retroactively (likely in the next few years or worst months). In the particular question above I am wondering if one way I could deal with this is to file chapter 7 while the claim is stale to have a chance at having it discharged or possibly have my exempt assets more protected. I am reasonably well off in terms of assets and income but should this happen I could see how I could be on the financial edge the rest of my life at best. I want to play chess and go down many possible paths to help understand what I should eventually do when I start working with a lawyer.

          So I am talking about this being the principal claim as I have little consumer debt which is the reason I could pass the means test. You seem to be saying that a trustee ignored a valid 502(b) for you. It sounds like you are suggesting even if this person filed a proof of claim in my potential chapter 7 against the (contingent, disputed, unliquidated) unsecured claim, you think the trustee could ignore a 502(b) I file that the claim (for which they filed proof) is stale ? It sounds like you are also saying even if this person does not file a proof of claim against me I should (if I do the chapter 7) file a Complaint to Determine Dischargeability which if they don't answer I get a default judgement and it is discharged ? Thanks much.

          Comment


          • #6
            Trustees don't file objections to claims in Chapter 7s unless they attach to non-exempt (Estate) property. It's as simple as that. They don't do work that's not required to protect the interests of "all" creditors.

            Unless the claim is an exception to discharge, your Chapter 7 would discharge the debt (period). That's the problem with speculation. A dischargeable debt is discharged. It doesn't matter if they don't file a proof of claim. It only matters that the debt was scheduled by you and they received "notice" of the bankruptcy. When they receive notice of the bankruptcy, it is up to them to assert some reason that their otherwise non-dischargeable claim should not be discharged.

            In fact, I had a stale claim (20 years old) filed by American Express and I personally filed an objection to exemption under 11 USC 502. The judge "coached" me and told me to withdraw my objection and allow the claim -- because it attached to nothing anyhow -- and it would definitely be discharged without question.

            I still don't understand all the speculation. The entire purpose to pay an attorney is so that you don't have to think about these things. Unless you're talking about something that falls under 11 USC 523, the finality of a bankruptcy discharge is certain. Bankruptcy is finality; It is not about living on edge. As the 11th Circuit opined, the purpose of the discharge to bring a finality so that there is no question about a claim.
            Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
            Status: (Auto) Discharged and Closed! 5/10
            Visit My BKForum Blog: justbroke's Blog


            I am not an attorney. Any advice provided is not legal advice.

            Comment


            • #7
              1. What makes you think your State’s legislature is going to change a SOL?

              2. What makes you think that any such change is going to have a retroactive effective date?

              3. If the injured party believes that the damages resulting from the tort you committed against him or her should be held non-dischargeable AND you gave that person PROPER notice of the filing of your bankruptcy, it is up to that person to TIMELY file a Complaint under 532(a)(2), (4) or (6) against you REGARDLESS of the SOL. If not so timely filed the claim against you, as it relates to CIVIL liability, will be subject to the Discharge.

              4. Once the Complaint is filed it will be up to YOU to either defend (and win), settle or default.

              You should be focusing on items 3 and 4. Anything else is not really relevant.

              Des.

              Comment


              • #8
                Came back to review. Meant 523(a)(2),(4) or (6) - not 532 - typo.

                Des.

                Comment


                • #9
                  despritfreya 1&2) Thanks but I am not looking for an evaluation of that on this forum.
                  You seem to be saying the potential claimant must file Complaint to Determine Dischargeability and justbroke seems to be saying I should have one filed. Am I misunderstanding or are the two of you looking at that part differently ? It sounds like as long as the statute of limitations is not a statute of repose (in this case it is not) that is not relevant. Thanks both.

                  Comment


                  • #10
                    It is up to the creditor to file a TIMELY complaint. As an attorney I would never recommend that my client do a creditor's work or open the can of worms. If creditor fails to do what is required the claim is discharged.

                    Now, in your case, since you indicate that the tort claim is your only major claim, you are in what we call a "two party dispute". You can bet that the claimant is not likely to miss the deadline, especially if he or she has an attorney. I trust you have a well qualified bk attny. If you don't - get one.

                    Des.

                    Comment


                    • #11
                      I've been away and just to clarify, I suggested that a debtor "may" consider pursuing a Dischargeability complaint prior to discharge and Des is saying that other than for something already non-dischargeable (or questionable) to leave it up to the creditor to file a complaint regarding dischargeability of their claim. I have never opened one prior to discharge, but I have after discharge (in a combined dischargeability and violation of discharge injunction). As I wrote, a debt is discharge unless its the debt follows the narrow exceptions. 11 USC 523(c) specifically takes the otherwise non-dischargeable claims that Des writes about... a(2), a(4), and a(6)... and they are discharged if they are scheduled and the creditor received notice, but didn't file the determination complaint.

                      I just believe(d) that there may be some cases where a debtor may file a dischargeability complaint prior to discharge on a questionable claim but the reality is, as Des points out from practice, that the debtor may not want to poke the bear (open the can of worms).

                      I would take heed to Desprifreya's suggestion on being represented in any bankruptcy that has a tort claim.
                      Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
                      Status: (Auto) Discharged and Closed! 5/10
                      Visit My BKForum Blog: justbroke's Blog


                      I am not an attorney. Any advice provided is not legal advice.

                      Comment

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