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January 14, 2014
Find Out Why Bankruptcy Court Rules Debtor Entitled To Tax Refund

Chapter 7 Bankruptcy Debtors Not Denied Discharge For Failing To Attend Hearing

Posted: March 04, 2012

Find Out Why Chapter 7 Trustee's Motion Fails In This Chapter 7 Tennessee Case


James Albert and Linda Gail Clayton filed their Chapter 7 bankruptcy case in Tennessee on December 28, 2008. Their case had been previously a Chapter 13 bankruptcy proceeding. The meeting of creditor hearing was scheduled for May 27, 2011. They did not appear at the hearing and their attorney repesented to the Chapter 7 trustee that they did not have gas money to be able to attend their 341 meeting of creditors meeting.

The meeting of creditors hearing was rescheduled several times and Debtors did not appear. After May of 2011 Debtor's bankruptcy attorney was unable to reach Debtors. The Chapter 7 trustee subsequently filed a motion to have the court compel Debtors appearance at their creditor hearing. The bankuptcy court granted the motion and Debtors were ordered to appear on August 26, 2011 for their meeting.  The order for their appearance was sent to 1005 Mobley Road.The BNC Certificate showed that the address for the debtor was an address to which the United States Postal Service no longer was delivering.
 
When the Debtors failed to appear at their meeting the Trustee filed an adversary proceeding seeking to deny the Debtors a discharge for refusing to obey a court order pursuant to 11 U.S.C. 727(d)(3) and 727(a)(6)(A). In its analysis the bankruptcy court noted that the Federal Rule of Bankruptcy Procedure 7004(b)(0) provides that service may be made [u]pon the debtor, after a petition has been filed by or served upon the debtor and until the case is dismissed or closed by mailing a copy of the summons and complaint to the debtor at the address shown in the petition or to such other address as the debtor may designate in a filed writing."

In this case the record reflected that the Debtors had surrendered their residence at 1005 Mobley Road and that the mortgage company had obtained relief from the automatic stay. Although the Court agreed with the trustee that service at the last known address upon the Debtors was legally sufficient, the Court was unpersuaded by the Trustee's legal arguments.

The Chapter 7 trustee sought to deny the Debtors a discharge based upon 11 U.S.C. 727(d)(3) and 11 U.S.C. 727(a)(6)(A) of the bankruptcy laws. These portions of the bankruptcy laws provide that a debtor may be denied a bankruptcy discharge where a debtor has "refused.. to obey any lawful order of the court." The Court stated that it could not find that the Debtors refused to obey the order to attend the meeting of creditors hearing beause the trustee could not proved Debtors had actual knowledge of the hearing.

In this case Debtor's bankruptcy attorney had represented to the Court that he was unable to reach his clients and the record reflected that the Debtors surrendered their home to the mortgage company. Based upon these facts the Chapter 7 bankruptcy Trustee's motion failed.

If you have questions about the results in this Chapter 7 Tennessee case or have questions aboutbankruptcy law in Tennesse  it is strongly recommended that you contact a Tennessee bankruptcy attorney to discuss your situation.