THE Hon. Harry Russell, presiding US Bankruptcy Court Judge of Courtroom 1668 in Los Angeles, California, denied the motion for relief from the automatic stay by a creditor of a Hispanic debtor in Chapter 7 petition on October 25, 2011.
This Author was retained by his Hispanic client, residing in Canyon Country, California, to oppose the motion for relief from the automatic stay, after his prior attorney, who filed his and his wife’s Chapter 7 petition, had declined to file opposition papers.
The Bankruptcy Judge denied the relief from stay, filed pursuant to Bankruptcy Code Section 362(d), on the ground that the bar date of September 30, 2011, the 60-day (after the first date set for the meeting of creditors under Section 341(a) of the Bankruptcy Code) deadline to file a complaint for nondischargeability, pursuant to Rule 4004 of the Federal Rules of Bankruptcy Procedure, had passed.
Chapter 7 petition filing on June 13, 2011:
The debtor, joined by his wife, filed their chapter 7 bankruptcy petition through prior counsel on June 13, 2011, listing two secured and nine unsecured creditors, including the creditor who filed the motion for relief from the automatic stay.
Their monthly average income was $5,200.00 and average monthly expenses $5,202.00, as stated in Schedules I & J of their Chapter 7 petition. Moreover, he has additional business expenses as a self-employed gardener.
They filed for Chapter 7 protection in good faith and not to delay, hinder, or interfere with moving creditor’s civil action for damages against him for assault, battery, intentional infliction of emotional distress, and negligence.
The same moving creditor was the victim in a related criminal case filed against the husband debtor on the same assault and battery incident, for which the amount of restitution of $43,000.00 plus interest was ordered owing to the victim by the defendant, now debtor.
Bases of motion for relief from the automatic stay:
The moving creditor filed his Motion under Bankruptcy Code Section 362(d). Indeed, the Bankruptcy Court has wide latitude in crafting relief from stay: termination of stay, modification or placement of condition(s) on the stay, or even annulling the stay.
The creditor in this case sought to lift the automatic stay to enable him to prosecute his aforesaid civil action for damages against the husband debtor, alleging that: (a) the bankruptcy case was filed in bad faith specifically to delay, hinder, or interfere with the prosecution of the non-bankruptcy action; and (b) the claims are non-dischargeable in nature and can be most expeditiously resolved in the non-bankruptcy forum.
His Motion was heard by the Hon. Harry Russell on October 25, 2011, with his counsel and this Author present in Court.
Grounds for opposition to the motion for relief from the automatic stay:
This Author was retained to principally oppose the motion for relief from the automatic stay, because, if the aforesaid civil action for damages were to proceed to monetary judgment, the debtors-spouses would be liable for additional general damages, punitive damages, attorney’s fees, and costs.
Debtor’s Opposition to the Motion for relief from stay rebutted the aforesaid two bases for the creditor’s motion: (a) the Chapter 7 Petition was filed in good faith and not to delay, hinder, or interfere with movant’s civil action; and (b) not all claims in moving creditor’s civil action are non-dischargeable; only the $43,000.00 restitution is non-dischargeable.
Bankruptcy Judge Harry Russell agreed with the moving creditor that the claims can be most expeditiously resolved in the non-bankruptcy forum, but for these claims being dischargeable because no complaint on nondischargeability was filed by the creditor on or before the September 30, 2011 bar date.
In effect, it was futile to allow the civil action to proceed by lifting the automatic stay because the claims therein will be discharged by the forthcoming discharge order, since their nondischargeability could no longer be adjudicated in adversary proceedings in the Bankruptcy Court.
The moving creditor blew the statute of limitations: the bar date of September 30, 2011, and could no longer file a complaint on nondischargeability of his claims to avoid their discharge in a Chapter 7 petition.
The moral of the story is: don’t miss the bar date for filing of a complaint on nondischargeability. If you do, the relief from the automatic stay is useless.
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Roman P. Mosqueda has practiced criminal defense and Immigration law for over 20 years. He is a long-time member of the California Public Defenders Association. , and trained as a prosecutor with the Los Angeles City Attorney under the Trial Advocacy Program of the Los Angeles County Bar Association. He is also a volunteer, State-Bar trained arbitrator on attorney’s fees dispute resolution. Send comments or inquiries to This e-mail address is being protected from spambots. You need JavaScript enabled to view it , or call (213) 252-9481 for free consultation appointment, or visit his website at www.mosquedalaw.com
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