DeGirolamo, Trustee - Canton v. Thomas

OCR transcription for search; preserved printed pages are authoritative

The court incorporates by reference in this paragraph and adopts as the findings and orders
of this court the document set forth below.

/S/ RUSS KENDIG

Russ Kendig
United States Bankruptcy Judge

UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF OHIO

EASTERN DIVISION
IN RE: CHAPTER 7
DELORISE KAY THOMAS, CASE NO. 05-68035
Debtor. ADV. NO. 06-6188
ANTHONY J. DEGIROLAMO, JUDGE RUSS KENDIG
Plaintiff,
Vv.
MEMORANDUM OF OPINION
DELORISE KAY THOMAS, ) (NOT INTENDED FOR
) PUBLICATION)
Defendant. )
)

On March 22, 2011, the court entered an order revoking Debtor’s discharge. On May
9, 2011, Debtor moved to vacate the order. No objections were filed.

The court has jurisdiction of this proceeding pursuant to 28 U.S.C. § 1334 and the
general order of reference entered in this district on July 16, 1984. Venue in this district and
division is proper pursuant to 28 U.S.C. § 1409. This is a core proceeding under 28 U.S.C.

§ 157(b)(2)(J).

This opinion is not intended for publication or citation. The availability of this
opinion, in electronic or printed form, is not the result of a direct submission by the Court.

FACTS
Debtor filed a chapter 7 petition on October 13, 2005. In December 2005, the chapter

7 trustee Anthony J. DeGirolamo (“Trustee”) determined that assets were available for
distribution to creditors. The estate was comprised of the non-exempt equity in an

ae Doc 19 FILED 06/06/11 ENTERED 06/06/11 16:16:28 Page1of5

automobile titled to Debtor. Trustee and Debtor agreed to compromise the equity in the
vehicle and Debtor was required to pay $3,444. The terms required twelve monthly
payments of $250 per month and a balloon payment of $444 within twelve months. The
compromise was approved by the court on February 23, 2006.

Debtor received a discharge on February 1, 2006.

On November 13, 2006, Trustee filed an adversary complaint to revoke Debtor’s
discharge. Trustee alleged Debtor failed to make payments under the compromise. Trustee
sought revocation of Debtor’s discharge under 11 U.S.C. § 727(d)(3) for failing to abide by
acourt order. Debtor did not answer the complaint, but entered into an agreed order in April
2007 to pay the full amount of her 2006 federal and state income tax returns toward the
$3,444 owed. Additionally, she was required to make payments of $50 per month until the
amount was paid in full. The order contained a default provision.

Trustee filed a notice of default on September 9, 2010. He indicated he had received
payments totaling $2,050 since the agreed order resolving the adversary complaint but
Debtor’s last payment was made in May 2010. The notice of default was withdrawn on
September 20, 2010. A subsequent notice of default was entered on March 7, 2011. At that
point, Trustee had received a total of $2,850. The last payment from Debtor was September
2010. The order revoking the discharge was entered on March 22, 2011 following Debtor’s
failure to cure the default.

On May 9, 2011, Debtor filed an amended motion to vacate the revocation of
discharge. The entirety of the motion follows:

Now come the Debtors (sic), by and through the under-
signed Counsel, and hereby moves (sic) this Court to
vacate the Order Revoking Discharge entered on March
22, 2011 and for an Order to Reinstate debtor’s discharge.

The grounds for this motion is (sic) that debtor has paid
the funds she owes to the Trustee and is now paid in full.

Wherefore, Debtor prays for an Order in accordance with
this Motion.

No objections were filed.

Trustee’s interim reports give a glimpse of Debtor’s payments.

Date of Report: Amount Collected:
12/12/2005 $ 0.00
03/14/2007 $ 250.00
08/09/2007 $ 400.00
09/30/2008 $1,050.00
08/05/2009 $1,400.00
07/28/2010 $2,050.00

Between entry of the compromise order and March 14, 2007, when payments were $250 per
month, Debtor paid a total of $250.00 for the year. In 2007, after Debtor agreed to pay her

2

06-06188-rk Doc19 FILED 06/06/11 ENTERED 06/06/11 16:16:28 Page 2of5

federal and state income tax refunds, she paid $150.00.
LAW AND ARGUMENT

This case is a prime illustration of a debtor ignoring the smoke and waiting until she
sees flames before looking for a fire extinguisher. In February 2006, Debtor agreed to pay
Trustee $3,444. She did not fully comply with the order until March 2011, more than five
years later. She defaulted in payments under the compromise order and then later defaulted
on the agreed order resolving the adversary complaint. Creditors have waited five years for
the pittance they are receiving. And, adding an accelerant to the fire, the bulk of the
distribution will be paid onanondischargeable student loan, so Debtor is the main benefactor

of the delay.

This is not the first case of this type before the court. In December 2008, the court
issued a memorandum to chapter 7 trustees advising:

Recently, the Court has reviewed two orders to reinstate

a discharge following entry of an order of revocation due
to a debtor’s non-payment and/or failure to comply with a
turnover order. The decision to reinstate a discharge in-
volves consideration of the conflicting goals of allowing
a fresh start with preserving the finality of judgments.

The Court will consider motions to reinstate discharges
which have been revoked, but only upon presentation of

a verified factual premise for vacating the order of discharge.
In order to have a revocation order set aside, the Court must
be informed of the “story” behind the revocation and the
reason for the proposed reinstatement of the discharge,
typically involving extenuating circumstances. A mere reci-
tation of facts will not be sufficient: some verification must
be provided. Additionally, upon successful reinstatement of
the discharge, the court costs associated with the action must
be paid by the debtor(s) absent truly unusual circumstances.
The motion should also set forth the amount of any expenses
that will not be paid to the estate, e.g. attorney fees.

The court interprets Debtor’s motion to be a motion for relief from judgment or order
under Rule 9024, which adopts Federal Rule of Civil Procedure 60 into bankruptcy practice.
In applicable part, the rule provides:

(b) Grounds for Relief from a Final Judgment, Order or
Proceeding. On motion and just terms, the court
may relieve a party .. . from a final judgment, order,
or proceeding for the following reasons:

(1) mistake, inadvertence, surprise or excusable
neglect;

(2) newly discovered evidence that, with reason-
able diligence, could not have been discovered
in time to move for a new trial under Rule 59(b);

3

06-06188-rk Doc19 FILED 06/06/11 ENTERED 06/06/11 16:16:28 Page 3of5

(3) fraud (whether previously called intrinsic or
extrinsic), misrepresentation, or misconduct by

an opposing party;
(4) the judgment is void;

(5) the judgment has been satisfied, released, or
discharged; it is based on an earlier judgment
that has been reversed or vacated; or applying
it prospectively is no longer equitable; or

(6) any other reason that justifies relief.

Fed.R.Civ.P. 60(b). Application of relief under 60(b) is tempered by ‘public policy favoring
finality of judgment and termination of litigation.’ Blue Diamond Coal Co. v. Trustees of
UMWA Combined Benefit Fund, 249 F.3d 519, 524 6" Cir. 2001) (citing Waifersong, Ltd.
Inc. v. Classic Music Vending, 976 F.2d 290, 292 (6 Cir. 1992). Movant bears the burden
on a Rule 60(b) motion. See In re G.A.D.., Inc., 340 F.3d 331 (6" Cir. 2003).

Debtor clearly has not met her burden on the present motion. The motion does not
include any citation to any law, code provision or rule. And, based on the information before
the court, Debtor has not convinced the court that merely paying the amount owed entitles
her to reinstatement of the discharge.

A review of similar cases demonstrates that relief is often very fact-specific. Courts
often take a hard line against debtors who are not blameless. For example, in In re Babcock,
Debtors’ discharge was revoked following their failure to cooperate with the trustee even
though they did so on the advice of counsel. Debtors ultimately sought reinstatement of the
discharge. Although the court recognized counsel’s role in the revocation of debtors’
discharge, it concluded that Debtors’ bore some culpability in the situation and denied their
request. Accord Fitzgerald v. Smith (Inre Smith), 1995 WL 241398 (Bankr. D. Idaho 1995)
(unreported); In re Jacobs, 2008 WL 4369273 (Bankr. D. Kan. 2008) (unreported).
Conversely, a lack of culpability was key in In re Oxley, 2007 WL 2590166 (Bankr. D. Kan.
2007). In that case, a creditor objected to reinstatement of Debtors’ discharge. In review,
the court found that Debtors were unable to comply with the trustee’s turnover order at the
time it was entered and had not willfully disregarded the order, so the court allowed the
reinstatement to stand.

A case in this district, In re Parker offers further emphasis on the significance of a
debtor’s involvement:

The Court recognizes the importance of a discharge

to debtors seeking bankruptcy relief under the Bank-
ruptcy Code. However, reinstating the Debtor's
discharge would impress other debtors that they can
willfully fail to cooperate with a trustee and fail to
comply with the Court's orders and still have their
previously revoked discharge reinstated. Good faith

is required of every debtor proceeding in bankruptcy.
Moreover, the United States Supreme Court has held that
there is no constitutional right to a bankruptcy discharge,

4

06-06188-rk Doc19 FILED 06/06/11 ENTERED 06/06/11 16:16:28 Page4of5

meaning a debtor has to “earn” his or her discharge.

A fundamental purpose of United States bankruptcy law
is to provide a fresh start to the honest but financially
distressed debtor. Local Loan Co. v. Hunt, 292 U.S.
234, 244, 54 S.Ct. 695, 78 L.Ed. 1230 (1934) (italics
added).

403 B.R. 487, 494 (Bankr. N.D. Ohio 2009).

The record demonstrates that Debtor scorned court orders for years. She comes to
the court with unclean hands and will not be rewarded.

Debtor’s motion for reinstatement of her discharge will be denied by separate order
issued concurrently with this opinion.

Service List:

John H Hornbrook
1400 N Market Ave
Canton, OH 44714-2608

Delorise Kay Thomas
1256 Manor Ave SW
Canton, OH 44710

Anthony J DeGirolamo
116 Cleveland Ave., N.W.
Suite 307

Canton, OH 44702

06-06188-rk Doc19 FILED 06/06/11 ENTERED 06/06/11 16:16:28 Page5of5