Bankruptcy Court Holds Unscheduled Claim Is Not Discharged

West Valley Medical Partners, LLC v. Menaker (In re Menaker), __B.R.__, No. 1:13-BK-13562-MB, 2019 WL 3064875 (Bankr. C.D. Cal. July 8, 2019).

The defendant-debtors leased commercial property form the plaintiff creditor prior to their bankruptcy filing.  They vacated the premises more than three years before the end of the lease term and then filed a voluntary chapter 13 petition.  They did not schedule the plaintiff’s claim or give it notice of the bankruptcy filing or the deadline to file a claim.  Their plan was confirmed and did not include any payments to plaintiff.  Plaintiff filed a complaint for breach of the lease in state court.  The defendants thereafter amended their schedules to add plaintiff as an unsecured creditor.  The defendant-debtors obtained their discharge and the case was closed.  The plaintiff moved to reopen the case to obtain a determination that its claim was not dischargeable under section 523(a)(3)(A) of the Bankruptcy Code.

Section 523(a)(3)(A) provides that a claim is not dischargeable if it is “neither listed nor scheduled … in time to permit . . . timely filing of a proof of claim, unless such creditor had notice or actual knowledge of the case in time for such timely filing.”

The court overruled the debtors’ equitable arguments, allegations of actual knowledge, and their laches defense.  Based on a plain reading and application of the statute, the court ruled in favor of the plaintiffs, holding the claim nondischargeable under section 523(a)(3)(A).