Court May Consider Best Interests of Creditors

Court

Minnesota Bankruptcy Case: Court May Consider Best Interests of Creditors When Asked to Approve Debtor’s Waiver of Discharge

The following is a summary of a Minnesota bankruptcy case or a case relevant to Minnesota bankruptcy law.

Minnesota Bankruptcy Case:

Asbury v. Alliant Bank (In re Asbury), 423 B.R. 525 (B.A.P. 8th Cir. (Mo.) 2/9/10) (Mahoney, J.).

Case Summary:

Court May Consider Best Interests of Creditors When Asked to Approve Debtor’s Waiver of Discharge

The Eighth Circuit BAP, over a dissent, affirms the bankruptcy court’s refusal to approve the debtor’s waiver of discharge because it would not be in the best interests of the parties, including creditors. When the debtor filed, he was besieged by dischargeability and discharge litigation. He filed a waiver of discharge, which §727(a)(10) requires be approved by the court. Creditors objected to the waiver, arguing that the debtor was attempting to retreat to Florida and force creditors to sue him there. The bankruptcy court refused to approve the waiver because it would prejudice creditors, since the bankruptcy court has jurisdiction to determine dischargeability and to enter money judgments. On appeal, the BAP panel majority affirms, holding that the provision of §727(a)(10) requiring court approval implies that the court may protect the interests of creditors in considering whether to approve a waiver of discharge, even though the section contains no language regarding the interests of creditors. The dissent sees a more limited role for the court. Under the Bankruptcy Act, no court approval was required, and the Code does not include the language “after notice and a hearing.” This leads the dissenting judge to conclude that the court’s role is limited to assuring that the statutory requirements are met – that the debtor has knowingly executed the waiver.

Credit: The preceding was a summary of a case relevant to Minnesota bankruptcy law. The case summary was prepared by the U.S. Bankruptcy Court through Judge Robert J. Kressel & attorney Faye Knowles.