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party's neglect to prosecute a time[ly] appeal will bar relief under the rule.'" Sanctions under FED. R. BANKR. P. 9011 were appropriate.).
Fokkena v. Klages (In re Klages), 381 B.R. 550 (B.A.P. 8th Cir. 2008) (Failure to turn over tax refund was ground to revoke discharge under S 727(d)(2). Chapter 7 trustee advised debtor not to spend tax refund without permission even after discharge. Debtor received written handout that stated "'[d]o not spend any of your tax refunds until you have received approval form my office, even it [sic] you have received notice from the Bankruptcy Court that a bankruptcy discharge has been entered.'" Debtor received state ($65) and federal tax ($3,445) refunds after discharge was entered, and spent refunds on living expenses. Trustee sought turnover of $1,556.11. Noncompliance provoked UST's action to revoke discharge. "A discharge will be revoked only if the debtor's failure to deliver property of the estate is done both knowingly and fraudulently. . . . Debtor clearly knew he had a duty to provide a copy of his tax returns to the Trustee and that he may have a duty to deliver tax refunds to the Trustee. . . . [F]ailure to do so was . . . done knowingly. . . . Fraudulent intent may be established by showing that the debtor knowingly made an omission that misleads the trustee or that the debtor engaged in a fraudulent course of conduct. . . . [I]ntent may be inferred from all the surrounding circumstances[.] . . . Fraudulent intent may also be established by showing that the debtor acted so recklessly that fraud can be implied. . . . A debtor cannot ignore information given to him and then claim ignorance. Such behavior is so reckless that fraud can be implied.").
Hamilton v. Herr (In re Hamilton), 540 F.3d 367 (6th Cir. 2008) (Because state court order interpreting extent or application of discharge in bankruptcy is entitled to preclusive effect only if correct, state court judgment that debtor waived defense of discharge in bankruptcy was void ab initio under S 524(a) and can be collaterally attacked in bankruptcy court notwithstanding unsuccessful state court appeal. Debtor failed to assert discharge in bankruptcy in state court litigation. State trial and appellate courts found discharge in bankruptcy was an affirmative defense that was waived and entered judgment for creditor. Debtor retreated to bankruptcy court, but bankruptcy court concluded "'[i]t is clear that the injury alleged by the [Debtor] . . . resulted from the state court Judgment and thus Rooker-Feldman directs that the lower Federal Courts lack jurisdiction[.]'" Citing Gruntz v. County of Los Angeles (In re Gruntz), 202 F.3d 1074 (9th Cir. 2000) (en banc), Sixth Circuit held that Rooker-Feldman does not apply when effect of state court judgment is to modify the discharge or to construe the discharge order incorrectly. Section 524(a) must be read in context with 28 U.S.C. 1334(b) which grants concurrent jurisdiction to state courts to determine the dischargeability of debts and recognizes a "limited authority for state courts to construe a bankruptcy court's discharge order. . . . [T]here exists a tension between 28 U.S.C. S 1334(b) and the Rooker-Feldman doctrine's aim to preserve state-court authority, and 11 U.S.C. S 524(a)'s aim to preserve the bankruptcy court's authority." Sixth Circuit concluded that "the state-court judgment . . . would constitute a modification of the discharge in bankruptcy only if the debt was actually discharged pursuant to the bankruptcy court's discharge order." Case remanded to bankruptcy court to make this determination.).
©2009 Keith M. Lundin
