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The Bankruptcy StrategistFeaturesBankruptcyLitigation

Ninth Circuit: Debt In Asset Case Is Nondischargeable If Debtor Fails to Properly Schedule the Debt

By Lawrence J. Kotler and Geoffrey A. Heaton
July 01, 2024

In a recent published decision, the U.S. Court of Appeals for the Ninth Circuit addressed a previously unresolved question in that circuit: whether a debtor's failure to properly schedule a debt in an "asset case" renders the debt nondischargeable. Answering the question in the affirmative, the court held that, with the exception of a "no asset" bankruptcy case, a debt is nondischargeable in its entirety if the debtor fails to properly schedule the debt. See, In re Licup, 95 F.4th 1234 (9th Cir. 2024).

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Background

In this case, creditor Jefferson Avenue Temecula LLC filed an unlawful detainer action against Christine Tracy Castro in 2012. In January 2013, Jefferson obtained a default judgment against Castro that included a monetary award to Jefferson in the amount of $31,780.29.

In February 2014, Castro and her husband, Edwin C. Licup, filed a voluntary Chapter 7 petition. Although Castro and Licup submitted the required schedule, or list, of their creditors' names and mailing addresses (also known as a creditor matrix), the document listed an incorrect address for Jefferson's counsel. Although there were assets for the trustee to distribute in the case, Jefferson never filed a proof of claim. It was undisputed that Jefferson failed to receive notice of the bankruptcy filing, and otherwise did not have knowledge of it in time to timely file a claim. The debtors later received a discharge that listed the debt owed to Jefferson as discharged. The bankruptcy case was closed in September 2016.

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