Practice Area: Chapter 7 bankruptcy
Outcome: Plaintiff Prevailed
Description: Appellants filed a Chapter 7 bankruptcy petition and were granted discharge. Appellants sought to reopen the case in order to pursue a lien avoidance. The bankruptcy court overruled the motion to reopen and ordered that all motions to avoid liens be filed not later than 60 days following the first date set for the meeting of creditors. Appellants argued on appeal that the bankruptcy court exceeded its authority in setting a time limit on motions to avoid liens because the 60-day rule precluded any judge from exercising his sound discretion to reopen cases, a discretion granted by 11 U.S.C.S. § 350 (b). The court ruled that exemption statutes were liberally construed in favor of the debtor. Further, the court held that in granting authority to reopen cases for reasons specified in § 350, Congress stated its intention that finality not be the sole consideration in the quest for justice. The court reversed the order setting a time limit on motions to avoid liens, concluding that § 350, the legislative history, and the theory underlying the doctrine of laches, all contemplated an exercise of discretion that was completely precluded by the rule raised as a bar to appellants. Order setting a time limit on motions to avoid liens was reversed where exemption statutes were to be liberally construed in favor of the debtor, and a rule barring motions to avoid liens precluded the exercise of discretion contemplated by the reopening statute, its legislative history, and the theory underlying the doctrine of laches.