Opinion
Case No. 12-33124
02-21-2018
In re: PALMER, BARBARA F., Debtor.
Chapter 7
ORDER REGARDING TRUSTEE'S OBJECTION TO DEBTOR'S AMENDED EXEMPTIONS
The Court has before it Trustee Collene K. Corcoran's Objection to Amended Exemptions. For the reasons stated herein, the Court holds that Debtor is entitled to a hearing to determine whether amendment is procedurally appropriate in this case pursuant to Federal Rule of Bankruptcy Procedure 9006(b)(1). At this time, the Court does not address Trustee's substantive arguments regarding the proposed amendments, as doing so will only become necessary if it is first determined that amendment is procedurally proper.
In this case, Debtor filed a bankruptcy petition in July 2012 and her case was closed in November that same year. Subsequently, her case was reopened and Debtor sought to amend her exemptions in October 2017, nearly five years after the case was originally closed. The Trustee objects to the proposed amendments, in part, based on the argument that Federal Rule of Bankruptcy Procedure Rule 1009 prohibits amendment after a case is closed, regardless of whether the case eventually is reopened. The Court disagrees with the Trustee's position.
Rule 1009 provides that a petition, list, schedule, or statement may be amended by a debtor, as a matter of course, "any time before the case is closed." When that Rule is read in a vacuum, the Trustee's position has merit. But the Court cannot read Rule 1009 in a vacuum. Instead, the Court must read that Rule in the context of the rest of the Bankruptcy Rules and Code, which include Rule 9006(b)(1).
Pursuant to Rule 9006(b)(1):
[W]hen an act is required or allowed to be done at or within a specified time by these rules...the court for cause shown may at any time in its discretion...on motion made after the expiration of the specified period permit the act to be done where the failure to act was the result of excusable neglect.Thus, according to the plain language of Rule 9006, a bankruptcy court has discretion to allow an act, such as amendment of a schedule, outside of the time period prescribed for that act if a debtor shows cause resulting from excusable neglect.
This Court is aware that at least one court has read Rule 1009 strictly and determined it prohibits any amendment whatsoever after a case is closed. See In re Bartlett, 326 B.R. 436 (Bankr. N.D. Ind. 2005). That approach is too restrictive and ignores the principles of Rule 9006. Similarly, the Court disagrees with a second approach that would allow post-closure amendment freely, regardless of the reason it is needed. See Goswami v. MTC Distrib. (In re Goswami), 304 B.R. 386 (9th Cir. BAP 2003); see In re Mathis, 2007 WL 954756 (Bankr. E.D. Tenn. 2007). That approach is too permissive, ignoring Rule 1009 in the same way the first approach ignores Rule 9006.
Instead of these extremes, the Court adopts a middle-ground approach utilized by numerous other courts addressing this issue. See In re Smith, 2014 WL 7358808 (Bankr. D. N.M. 2014); see also Moretti v. Bergeron (In re Moretti), 260 B.R. 602 (1st Cir. BAP 2001), In re Schmidtke, 513 B.R. 579 (Bankr. D. Colo. 2014), In re Paulette, 493 B.R. 729 (Bankr. D. Md. 2013), and In re Wilmoth, 412 B.R. 791 (Bankr. E.D. Va. 2009). According to the middle-ground approach, a debtor's ability to amend as a matter of right ends at closure, but a court may allow amendment if the debtor satisfied Rule 9006. In re Smith, 2014 WL 7358808, at *3-4. Legally, this approach gives weight to both of the relevant Bankruptcy Rules rather than disregarding one or the other entirely. Practically, this approach avoids the harsh result of prohibiting amendment outright while also requiring the debtor to justify her need to revisit issues that otherwise should have been addressed before her bankruptcy was closed.
Accordingly, for the reasons stated herein, the Court Orders that the parties attend a hearing to determine whether cause exists under Rule 9006(b)(1) for a finding of excusable neglect that would allow Debtor to amend her schedules. The Courtroom Deputy will contact counsel to schedule this hearing at a time for convenient for all involved. The Court reserves ruling on any remaining issues related to Debtor's proposed amendments until it has made a determination under Rule 9006. Signed on February 21, 2018
/s/ Daniel S. Opperman
Daniel S. Opperman
United States Bankruptcy Judge