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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).

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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