2001 #33 Outerkirk 8-13-01

IN RE: PETER J. AND TRACY A. OUDERKIRK, Bankr. No. 01-40240,Chapter 7

The matter before the Court is Debtors' Motion for Order Directing Clerk of Court to Discharge Judgments Discharged in Bankruptcy and related pleadings. ⁽¹⁾ This is a core proceeding under 28 U.S.C. § 157(b)(2). This letter decision and accompanying order shall constitute the Court's findings and conclusions under Fed.Rs.Bankr.P. 7052 and 9014. As set forth below, the Court concludes that Debtors' motion must be granted in part and denied in part.

Summary. On July 12, 1996, Credit Collection Services, Inc., obtained in state court a judgment for $1,501.57, plus interest, against "Peter & Tracy Ouderkirk." On April 21, 1997, Hausmann Feed Mill obtained in state court a judgment for $3,980.67, plus costs, against "Dlanor, Incorporated." On August 7, 1997, Rosebud Farmers Union Coop Association obtained in state court a judgment for $452.94 plus costs against "Dlanor Dairy % Chas. Ouderkirk." On January 8, 1998, Dakota Pride Cooperative obtained a judgment in state court for $13,817.79, plus costs and interest, against "Dlanor, Inc." On January 15, 1998, Automated Dairy Services, Inc., obtained in state court a judgment for $3,923.83, plus costs, against "Pete Ouderkirk DBA Dlanor Corp."

Peter J. and Tracy A. Ouderkirk ("Debtors") filed a Chapter 7 petition in bankruptcy on March 15, 2001. On their petition, they stated they formerly did business as "Dlanor, Inc., sole proprietorship." On March 17, 2001, the Bankruptcy Clerk gave notice of the commencement of the case to Debtors' creditors and other parties in interest, including the judgment holders listed above. The notice of commencement of case advised creditors that June 22, 2001, was the deadline for filing a complaint objecting to the discharge of all debts or to determine the dischargeability of a particular debt. No timely complaints were filed. On June 25, 2001, Debtors were granted a discharge under § 727 of the Bankruptcy Code.

On July 18, 2001, Debtors filed a Motion for Order Directing Clerk of Court to Discharge Judgments Discharged in Bankruptcy. They wanted to have judgments that were discharged during their bankruptcy case removed from the state court's records. All the judgments listed above were included in Debtors' motion. On July 20, 2001, Rosebud Farmers Union filed an objection to Debtor's motion. It argued that Debtors' oral promise to pay should be binding and that Debtors should be required by the Court to repay all their debts over time.

Discussion. Section 524(a)(1) of the Bankruptcy Code provides:

(a) A discharge in a case under this title -

(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[.]

Section 524(a)(1) does not require the debtor to do anything to void a judgment. The discharge automatically voids any judgment that represents a determination of the debtor's personal liability for a debt that has been discharged.

Section 15-16-20 of the South Dakota Code establishes the procedure for removing such a judgment from the records of the clerk of court for the county in which it was docketed. When a debtor receives a bankruptcy discharge, he may file a motion in the bankruptcy court for an order listing each state court judgment that has been voided. Upon receipt of the bankruptcy court's order, the clerk of court for the county in which the judgment was docketed must enter it in the judgment docket. This entry has the effect of discharging the listed judgments from and after that date.

In this case, all the judgment holders listed above received timely notice of Debtors' bankruptcy, but none of them objected to Debtors' discharge of all debts or to the dischargeability of their particular claim before the June 22, 2001 deadline. Thus, any pre-petition claim they had against Debtors Peter and Tracy Ouderkirk was discharged on June 25, 2001, and any judgment they held against Debtors Peter or Tracy Ouderkirk related to those discharged debts also was voided on that same date.

According to the state court's records, however, only two of the judgments that Debtors want voided were against them personally: the judgments held by Automated Dairy Services and Credit Collection Services. These judgments were, therefore, voided by Debtors' discharge in bankruptcy and may now be removed from the state court's records.

The judgments held by Hausmann Feed Mill and Dakota Pride Cooperative were against Dlanor, Incorporated. The judgment held by Rosebud Farmers Union was against Dlano Dairy and a Charles Ouderkirk. None of these entities -- Dlanor, Inc., Charles Ouderkirk, or Dlanor Dairy -- were debtors in this bankruptcy case, so no debts or judgments against them have been discharged. Further, although Debtors listed "Dlanor, Inc., sole proprietorship" on their petition, that entry did not entitle Dlanor, Inc., to a discharge of any claims or judgments against it. As a corporation, it could not, of course, also be a sole proprietorship. Also, as a corporation, it could not be a joint debtor with Peter and Tracy Ouderkirk; only spouses may be joint debtors. 11 U.S.C. § 302(a).

Accordingly, only the judgments held by Automated Dairy Services and Credit Collection Services against Debtors Peter and Tracy Ouderkirk personally have been discharged in this bankruptcy case and now shall be removed from the state court's records. The judgments held by Dakota Pride Cooperative, Hausmann Feed Mill, and Rosebud Farmers Union were not discharged in this bankruptcy case and shall remain on the state court's records. Further, since Automated Dairy Services' judgment was against both Debtor Peter Ouderkirk and Dlanor Corporation, the judgment against Dlanor Corporation shall remain in place.

The Court will prepare an appropriate order.

1. The relevant facts are not in dispute. The issue presented is purely a question of law. Thus, no hearing was held.