Jeanne M. Burns

UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
In re : Chapter 7
JEANNE M. BURNS :
Debtor : Bankruptcy No. 05-18693F
MEMORANDUM
The chapter 7 debtor, Jeanne M. Burns, has moved for an order declaring
that the "prepetition judgment held by creditor Sarasota CCM, Inc. [is] void." As will be
seen, Sarasota does not dispute the facts alleged by the debtor; nor does Sarasota dispute
that its prepetition judgment is indeed void under bankruptcy law. Rather Sarasota
opposes the relief sought by the debtor as "superfluous."
Upon consideration of the uncontested facts, and after hearing oral
argument, I conclude that the debtor is presently seeking an impermissible "comfort
order" that should be denied.
I.
The debtor alleged the following facts in her motion, all of which are
admitted by Sarasota in its answer:
1. Ms. Burns filed a no asset Chapter 7 proceeding on
June 24, 2005.
2. On January 12, 2006, Ms. Burns received a discharge.
3. Sarasota holds a prepetition state court judgment
against Ms. Burns in the amount of $21,082.44.
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4. The Sarasota judgment is now void under 11 U.S.C. §
524(a)(l).
5. Counsel for Sarasota has refused to provide undersigned
counsel with a praecipe to remove its judgment.
The debtor commenced this chapter 7 case on June 24, 2005. Her
bankruptcy schedules revealed that she did not own any real property at the time of her
bankruptcy filing. The debtor's statement of financial affairs disclosed that Sarasota
obtained judgment on May 26, 2004, in the Bucks County Court of Common Pleas. The
same statement of financial affairs reported that the debtor had not been the subject of any
attachments, levies or garnishments within one year of her bankruptcy filing.
The bankruptcy trustee in this case filed his report that there were no non-
exempt assets to administer. And on January 12, 2006, the debtor was granted a chapter 7
discharge under 11 U.S.C. § 727.'
The parties do not dispute that, under Pennsylvania law, Sarasota, although
a judgment creditor, held no lien against any property of the debtor at the time of her
bankruptcy filing. See In re Flowers, 1998 WL 191425 (Bankr. E.D. Pa. 1998); see
generally In re Hamilton. 286 B.R. 291, 293 (Bankr. D.N.J. 2002); In re Norvell, 198
B.R. 697, 699 (Bankr. W.D. Ky. 1996). As such, the prepetition judgment served only to
fix the debtor's personal liability to Sarasota. See In re Norvell.
By virtue of 11 U.S.C. § 524:
(a) A discharge in a case under this title-
'On January 17,2006,1 entered an order discharging the chapter 7 trustee from
any further duties but directing that the bankruptcy case remain open in light of the instant
motion, which was pending. Nonetheless, the clerk erroneously stated on the docket that the case
was closed.
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(1) voids any judgment at any time obtained, to the extent that
such judgment is a determination of the personal liability of
the debtor with respect to any debt discharged under section
727, 944, 1141, 1228, or 1328 of this title, whether or not
discharge of such debt is waived;
(2) operates as an injunction against the commencement or
continuation of an action, the employment of process, or an
act, to collect, recover or offset any such debt as a personal
liability of the debtor, whether or not discharge of such debt is
waived[.]
Thus, it is agreed that Sarasota's judgment has been made void by virtue of
section 524(a)(l). Furthermore, Sarasota also acknowledged at oral argument that section
524(a)(2) enjoins Sarasota from attempting to collect on this judgment in the future. See
In re Locust. 2005 WL 1288616, at *1 n.l (Bankr. M.D.N.C. 2005); In re Hamilton. 286
B.R. at 293. If Sarasota would attempt to collect on its void judgment after entry of
discharge, it could be held in contempt. See In re Lanford, 2004 WL 3155540, at *1
(Bankr. D.D.C. 2004).
II.
In this contested matter, there is no assertion that Sarasota has made any
effort to enforce or execute upon its judgment. Instead, debtor's counsel articulated a
concern that Sarasota may act upon its judgment some day in the future; or that third-
parties may not realize that the judgment was voided by the debtor's bankruptcy
discharge. Thus, the debtor seeks a declaration that Sarasota's judgment has been voided.
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Such a declaration was routinely issued under the former Bankruptcy Act of
1898, by virtue of a statutory provision. Section 14 of the former Bankruptcy Act
provided:
f. An order of discharge shall
(1) declare that any judgment theretofore or thereafter
obtained in any other court is null and void as a determination
of the personal liability of the bankrupt with respect to any of
the following . . . .
Former 11 U.S.C. § 32. Thus, by statute, Congress mandated that the discharge order
issued in a chapter 7 bankruptcy case declare that a judgment which did not create any
lien was voided. Consistent with this directive, former Official Bankruptcy Form No.
24—which contained the form discharge order—expressly stated in paragraph 2 the
above-quoted language of section 14f(l), noting that a prepetition judgment was void as
to personal liability of a discharged debt.
Current section 524(a)(l) of the Bankruptcy Code is the statutory successor
to section 14f. See In re Lanford, 2004 WL 3155540, at *1 n.l. The current statutory
provision (quoted earlier) makes no reference to the language of the discharge order, and
was intended to operate without the need for any judicial declaration:
Moreover, Section 524(a)(l) operates automatically, obviating
any need for the debtor to assert the discharge to render any
subsequent actions on the judgment void.
In re Hamilton, 286 B.R. at 293.
Current section 524(a) makes reference to the effect of the bankruptcy
discharge, rather than to the contents of the discharge order itself. Nonetheless, shortly
after the Bankruptcy Code was enacted, the form discharge order—then Official Form
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No. 27—contained language similar to that used in former Form No. 24: that a judgment
was null and void as to personal liability on a discharged debt.
In 1991, the Official Bankruptcy Forms were revised and Form No. 27
became Form No. 18. Its language, however, remained unchanged until 1997, when the
official form discharge order was modified. Now, the form discharge order simply states
that the chapter 7 debtor has been granted a discharge under section 727. The form order
no longer makes any reference to the voiding of judgments. The Committee Note
explained the reason for this change as follows:
The discharge order has been simplified by deleting
paragraphs which had detailed some, but not all, of the effects
of the discharge. These paragraphs have been replaced with a
plain English explanation of the discharge. This explanation
is to be printed on the reverse of the order, to increase
understanding of the bankruptcy discharge among creditors
and debtors. The bracketed sentence in the second paragraph
should be included when the case involves community
property.
Committee Note (1997).
The official explanation, included on the back of every chapter 7 discharge
order, discloses that a creditor "may have a right to enforce a valid lien." The explanation
does not expressly state that judgments are void as to personal liability on a discharged
claim. Thus, to some extent, the debtor's present motion suggests that the revision of the
form discharge order mistakenly deleted the language found in section 524(a)(l), and this
court should correct that error in this instance.
The debtor's contention ignores the statutory change from former section
14f(l)—which had directed the inclusion of language in the discharge order—to current
section 524(a)(l).
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When faced with a similar contention, two bankruptcy courts in reported
decisions have held that a court order restating the language of section 524(a)(l) after
entry of a chapter 7 discharge is inappropriate under the circumstance in this contested
matter:
Having made the above legal rulings [that the judgment did
not create any lien and so was made void by the discharge],
this Court is still faced with our original question of whether
we should enter a comfort order releasing void judgment liens
so they will not "encumber" the hypothetical real estate which
a debtor might acquire after the filing of their bankruptcy
case. We hold that, as a general rule, such orders are
unnecessary, as the bankruptcy discharge itself legally
satisfies and releases any judgment lien based on a
dischargeable obligation and no further action is necessary.
In re Norvell. 198 B.R. at 699; accord In re Hamilton. 286 B.R. at 293:
Because "the bankruptcy discharge itself legally satisfies and
releases any judgment lien based on a dischargeable
obligation," it is unnecessary to issue a "comfort order" to
protect the hypothetical real property that a debtor may
acquire post-petition. In re Norvell, 198 B.R. at 699.
This approach—that a comfort order that merely repeats the statutory
language is generally unwarranted—is consistent with the statutory change, with the
revisions to the official bankruptcy form, and with the concept of "ripeness" as it applies
to the Declaratory Judgment Act, 28 U.S.C. § 2201. As the Third Circuit Court of
Appeals has explained:
As many commentators have noted, it is difficult to define the
contours of the ripeness doctrine with precision. The task is
even more problematic when defining ripeness in the context
of declaratory judgment actions, for two reasons. First, there
is the considerable amount of discretion built into the
Declaratory Judgment Act itself. Even when declaratory
actions are ripe, the Act only gives a court the power to make
a declaration regarding "the rights and other legal relations of
any interested party seeking such declaration," 28 U.S.C. §
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2201; it does not require that the court exercise that power.
Second, declaratory judgments are issued before
"accomplished" injury can be established . .. and this ex ante
determination of rights exists in some tension with traditional
notions of ripeness. Nonetheless, because the Constitution
prohibits federal courts from deciding issues in which there is
no "case[ ]" or "controversy," U.S. Const, art. Ill, § 2,
declaratory judgments can be issued only when there is "an
actual controversy," 28 U.S.C. § 2201. The discretionary
power to determine the rights of parties before injury has
actually happened cannot be exercised unless there is a
legitimate dispute between the parties.
Step-Saver Data Systems. Inc. v. Wvse Technology. 912 F.2d 643, 646-47 (3d Cir. 1990)
(footnotes and citation omitted).
In order for a dispute to be sufficiently ripe to warrant the issuance of a
declaratory judgment, there must exist "adversity of the interest of the parties, the
conclusiveness of the judicial judgment and the practical help, or utility, of that
judgment." Id., at 647. The appellate court elaborated on these three elements of
ripeness concerning declaratory relief.
"For there to be an actual controversy the defendant must be so situated that
the parties have adverse legal interests." Id., at 648. Furthermore, the dispute must be
"based on a 'real and substantial controversy admitting of specific relief through a decree
of conclusive character, as distinguished from an opinion advising what the law would be
on a hypothetical state of facts.'" Id, at 649 (quoting Aetna Life Ins. Co. v. Haworth, 300
U.S. 227, 241 (1937)). Finally, "[t]he utility inquiry . . . goes not to whether the legal
rights will be clarified, but to whether the parties' plans of action are likely to be affected
by a declaratory judgment." Id., at 649 n. 9.
In this contested matter, the debtor only articulates a vague concern that she
may be, in the future, adversely affected by the continued recordation of a now void
7
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prepetition state court judgment against her. At present, however, her hypothetical
concerns have not ripened into any justiciable controversy. Thus, I must decline her
invitation to simply recite the language of section 524(a)(l) in an order where no present
dispute with Sarasota exists. See generally Coffin v. Malyern Federal Sav. Bank, 90 F.3d
851 (3d Cir. 1996). To do so would ignore the statutory change, as well as overrule the
expert opinion of the Bankruptcy Rules Committee, and the Supreme Court that adopted
its proposals, that such an order is unnecessary.
Of course, if a justiciable dispute later arises regarding Sarasota's
discharged debt and void judgment, this court may (if the bankruptcy case is properly
reopened under section 350(b)) resolve it.
An appropriate order shall be entered.
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UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
In re
JEANNE M. BURNS
Debtor
Chapter 7
Bankruptcy No. 05-1 8693F
ORDER
AND NOW, this 7th day of March 2006, for the reasons stated in the
accompanying memorandum, it is hereby ordered that the debtor's motion "to render the
prepetition judgment held by creditor Sarasota CCM, Inc. void" is dismissed as not ripe
for an adjudication. There is no justiciable dispute between the parties at present.
It is further ordered that upon entry of this order, this bankruptcy case shall
be closed pursuant to 11 U.S.C. § 350(a).
copies to:
Ms. Jeanne M. Burns
1455 Corry Avenue
Bensalem, PA 19020
John R. Crayton, Esq.
33 West Second Street
Moorestown, NJ 08057
Jacques H. Geisenberger, Jr., Esq.
GeisenbergerCooper & Lanza P.C.
941 Wheatland Avenue, Suite 201
Lancaster, PA 17603
BRUCE FOX
United States Bankruptcy Judge
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