Date of Decision:
July 24, 2018
Whether the Social Security Administration's pre-petition claim for the overpayment of benefits was not excepted from discharge under 11 U.S.C. § 523(a)(3) where the debtors had not scheduled the SSA as a creditor and where no assets were distributed to creditors, but where the parties disputed whether the SSA had actual knowledge of the bankruptcy case in time to file a nondischargeability complaint and disputed whether the SSA's claim would have been excepted from discharge as a product of fraud under 11 U.S.C. § 523(a)(2)(A) if a complaint had been timely filed?
The SSA's claim was not excepted from discharge under 11 U.S.C. § 523(a)(3). After a trial, the Court found the SSA did not have actual knowledge of the debtors' bankruptcy case before the deadline expired for the SSA to file a fraud-based nondischargeability complaint. However, the Court held the SSA's claim would not have been excepted from discharge under 11 U.S.C. § 523(a)(2)(A) if the SSA had been able to file a nondischargeability complaint, since the SSA would have been unable to show it justifiably relied on the incomplete income information the debtors provided to the SSA during the time the overpayments were made.
Full Bankruptcy Court Decision: