The Lawletter Vol 40 No 11
There are a variety of reasons why a federal bankruptcy case may be reopened after the debtor has been discharged and the case closed. A debtor may discover a claim, not known at the time the case was pending, and seek to reopen the case to discharge the claim. More typically, a Chapter 7 trustee may seek to reopen a case after discovering potential bankruptcy estate assets that the debtor failed to schedule. The party seeking to reopen may find intense challenges to the motion to reopen, because the reopening can result in a major redistribution of assets. Under the Bankruptcy Code, the bankruptcy court has broad discretionary authority to reopen a case "to administer assets, to accord relief to the debtor, or for other cause." 11 U.S.C. § 350(b).
Recently, in In re Ludvigsen, BAP No. MB 14-039, Bankr. No. 13-12232-WCH, 2015 WL 3733193 (B.A.P. 1st Cir. Jan. 16, 2015) (not for publication), the First Circuit Appellate Panel stated that a bankruptcy court properly exercises its discretionary authority to reopen a closed bankruptcy case when it does so to determine a substantive dispute on its merits, but does not exercise proper discretionary authority when only technical defects with the closed case are at issue. Further, when determining whether to exercise its discretionary authority, the court should look at each § 350(b) motion on a fact-by-fact basis. Id. at *4 (citing In re Dalezios, 507 B.R. 54, 58 (Bankr. D. Mass. 2014).
A motion to reopen may be filed only by a debtor or other "party in interest." Fed. R. Bankr. P. 5010. While neither the code nor the rules define "party in interest," the Bankruptcy Code defines a party in interest as "including the debtor, the trustee, a creditors' committee, an equity security holders' committee, an equity security holder, or any indenture trustee." 11 U.S.C. § 1109(b). This list is not exclusive and may include others with "sufficient stake in the proceedings." In re Papazov, 610 F. App'x 700, 701 (9th Cir. 2015) (not for publication) (internal quotation marks omitted).
Significantly, unlike under other Bankruptcy Code provisions, the bankruptcy court may grant a motion to reopen under § 350(b) without either notice or a hearing. "Nothing in § 350, or in its implementing Rule 5010, requires 'notice and hearing' prior to the motion being granted." In re Miller Auto. Group, Inc., No. 14-6047, 2015 WL 4746246, at *3 (B.A.P. 8th Cir. filed Aug. 12, 2015).
It is also important to recognize the limited scope of a § 350(b) motion to reopen. A bankruptcy case dismissed for cause prior to being fully administered may, under certain circumstances, be reopened under § 350(b) to address an unfinished detail or administrative issue. A case dismissed for cause may not be reopened under § 350(b) by a debtor as a way to have the dismissal set aside so that the debtor can create and enforce rights not in existence at the time the case was originally closed. In re Finch, 378 B.R. 241 (B.A.P. 8th Cir. 2007).