Parties’ Agreement to Extend Time Not Binding

Posted by NCBRC - June 30, 2014

An agreement between the debtor and a creditor to extend the deadline for filing an adversary complaint seeking denial of discharge under section 727 will not stand against later challenge on the basis of untimeliness where the extension was never ordered by the bankruptcy court. Shahrestani v. Alazzeh (In re Alazzeh), No. 13-1350 (B.A.P. 9th Cir. Apr. 24, 2014). The chapter 7 debtor and creditor agreed that the creditor could file an adversary proceeding beyond the Rule 4004(a) deadline for such filing. Over one year after the complaint was filed pursuant to that agreement, the debtor moved for summary judgment on the basis that the complaint was filed late. The bankruptcy court granted the motion.

The case began and ended with the language of the Bankruptcy Rules. Rule 4004(a) provides: “In a chapter 7 case, a complaint . . . objecting to the debtor’s discharge shall be filed no later than 60 days after the first date set for the meeting of creditors under § 341(a).” While Rule 9006(b)(3) contemplates extensions of deadlines, it specifies that extensions must comply with conditions set forth in Rule 4004. Rule 4004(b)(1) provides: “(1) On motion of any party in interest, after notice and hearing, the court may for cause extend the time to object to discharge.” Thus, the authority to extend a deadline lies with the bankruptcy court; not the parties.

The creditor argued to no avail that the debtor had waived the affirmative defense of untimeliness. Although the debtor agreed to the extension and then waited fifteen months after the complaint was filed to raise the defense, he had included a boilerplate objection on the basis of untimeliness in his pro per answer to the complaint. Relying on Kontrick v. Ryan, 540 U.S. 443, 458 (2004), the court found that so long as the defense was not waived a defendant may assert untimeliness at any time before a decision on the merits has been reached. The BAP noted that it was clear from the exchange between counsel for both parties when negotiating the extension that the debtor’s attorney agreed to stipulate to the extension in anticipation of a motion to the court which was never filed by the creditor’s counsel. The BAP thus found that the bankruptcy court did not abuse its discretion in granting summary judgment in favor of the debtor.

Alazzeh opinion


Post a Comment

You must be logged in to post a comment.