2002   #02       Kell 2-23-02

In re: STACY LEE KELL and ANGELA KAY KELL, Fka Angela Kay Collins, Bankr. No. 01-50563, Chapter 7

DECISION RE: DEBTORS' MOTION TO DISCHARGE JUDGMENTS

The matter before the Court is the Motion for Order Directing Clerk of Court to Discharge Judgments Discharged in Bankruptcy filed by Debtors on January 10, 2002, and the objection thereto filed by Mason's 5th Avenue on January 14, 2002. ⁽¹⁾ This is a core proceeding under 28 U.S.C. § 157(b)(2). This 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 will be granted in part and denied in part.

Summary. Several judgments were entered against Stacy L. and/or Angela K. Kell in state court. On October 4, 2001, Stacy and Angela Kell ("Debtors") commenced a Chapter 7 bankruptcy.

On October 6, 2001, the Bankruptcy Clerk served notice of the commencement of the case on Debtors' creditors using a mailing list submitted by Debtors. The Clerk's notice advised creditors that December 31, 2001, was the deadline to file a complaint objecting to Debtors' receipt of a general discharge of debts or objecting to the discharge of a particular claim against Debtors. Creditors who received this notice included judgment creditors Credit Collections Bureau, Northern Hills Credit, Inc., and Black Hills Collection Service. Several other creditors who also held pre-petition judgments against Debtors were not included on the mailing list prepared by Debtors. ⁽²⁾ These creditors, Mason's 5th Avenue (two judgments), Harding County, Hauge Associates, Inc., Queen City Medical Center (two judgments), the State of South Dakota, West Tire, Ed's Trailer Repair, and the Roundup Building Center, thus did not receive the notice of the commencement of the case from the Bankruptcy Clerk. ⁽³⁾

No creditors timely filed a complaint objecting to Debtors' receipt of a general discharge order or objecting to the discharge of a particular claim. Accordingly, on January 2, 2002, Debtors received their general discharge of debts under § 727 of the Bankruptcy Code.

On January 10, 2002, Debtors filed a Motion for Order Directing Clerk of Court to Discharge Judgments Discharged in Bankruptcy. The Motion included the judgments held by Credit Collections Bureau, Northern Hills Credit, Inc., and Black Hills Collection Service, the creditors who had received the Clerk's notice of commencement of case. The Motion also included the judgments held by the judgment creditors who did not receive the Clerk's notice of commencement of case: Mason's 5th Avenue (two judgments), Harding County, Hauge Associates, Inc., Queen City Medical Center (two judgments), the State of South Dakota, West Tire, Ed's Trailer Repair, and the Roundup Building Center. Debtors also did not properly serve two judgment creditors listed in the Motion; the State of South Dakota was not served at all and neither the State nor Harding County were served in compliance with Local Bankr. R. 9014-1(b)(4) and (5). On January 14, 2002, a general objection to the Motion was filed by Mason's 5th Avenue.

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, from the records of the clerk of court for the county in which it was docketed, any judgment that was voided in bankruptcy. When a debtor receives a bankruptcy discharge, he may file a motion before 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 debtor's personal liability under the listed judgments from and after that date.

In this case, only some of Debtors' judgment creditors received timely notice of Debtors' bankruptcy. These creditors, Credit Collections Bureau, Northern Hills Credit, Inc., and Black Hills Collection Service, did not timely object to Debtors' general discharge or to the dischargeability of their particular claims against Debtors before the December 31, 2001, deadline for doing so. Therefore, their claims were discharged on January 2, 2002. Their judgments were also voided that same date. Debtors are now entitled, through this present Motion and applicable state law, to have their personal liability on these creditors' judgments discharged on the state court's records.

Debtors are not entitled to have discharged -- at least based on the present record -- the judgments held by the other creditors listed in their Motion. The present record does not establish that judgment creditors Mason's 5th Avenue, Harding County, Hauge Associates, Inc., Queen City Medical Center, the State of South Dakota, West Tire, Ed's Trailer Repair, and the Roundup Building Center received formal notice of Debtors' bankruptcy case in time to file a complaint objecting to Debtors' general discharge of debts or objecting to the dischargeability of their particular claim against Debtors. Section 523(a)(3) of the Bankruptcy Code, therefore, requires Debtors to show that these creditors' claims and related judgments would nonetheless have been discharged even if they had received timely notice of the case. If Debtors want the Court to find that these several judgments are discharged under § 523(a)(3), Debtors will have to either commence an adversary proceeding under that Code section or they will have to get voluntary waivers of notice from these creditors and file the waivers with a new motion to discharge judgments.

As noted above, Harding County and the State of South Dakota did not receive proper service of Debtors' January 10, 2002, Motion for Order Directing Clerk of Court to Discharge Judgments Discharged in Bankruptcy. Harding County's service problem will be resolved if and when Debtors seek a declaration that the County's claim is discharged under § 523(a)(3). As to the State's claim, there is an additional problem. Debtors' schedules and statement of financial affairs referenced two different claims held by the State or its entities. However, that record is not sufficient for the Court to determine that the State's judgment listed in the present Motion did not arise from a child support or alimony claim that is excluded from discharge under § 523(a)(5). Thus, Debtors will not only need to file and properly serve a new motion to discharge the State's judgment, they will also need to show that the State's judgment does not fall under § 523(a)(5).

The Court will prepare an appropriate order.

Dated this 23rd day of January, 2002.

1. The relevant facts are not in dispute. The issues presented are questions of law. Thus, no hearing was held.

2. Debtors listed all the judgments in their Motion in their Statement of Financial Affairs, but apparently did not include these judgment creditors on their schedules of liabilities and their mailing list of creditors.

3. The State of South Dakota's Office of Child Support Enforcement did receive the Bankruptcy Clerk's notice of commencement of case. Any child support debt or related judgment, however, would not be dischargeable. 11 U.S.C. § 523(a)(5). Further, if another state office, agency, or department had another type of claim against Debtors, service on the Child Support Office would not be sufficient as service on the other state entity. SeeLocal Bankr. R. 9014-1(b)(4).