The one-year window to revoke discharge is “an ordinary, run-of-the-mill statute of limitations,” the Ninth Circuit said in reversing the Bankruptcy Appellate Panel, which had held that failing to move within one year is jurisdictional under Section 727(e)(1).
An individual received a chapter 7 discharge. Months later, the trustee learned that the debtor “fraudulently omitted a key asset: his own home,” Circuit Judge Paul J. Watford said in his June 14 opinion for the appeals court.
The trustee moved to revoke the debtor’s discharge under Section 727(d), which permits revocation if “discharge was obtained through the fraud of the bankrupt.” However, the trustee did not act until 15 months after discharge had been granted.
In bankruptcy court, the debtor did not raise Section 727(e)(1) as an affirmative defense. That section provides that a trustee, a creditor, or the U.S. Trustee “may request a revocation of discharge . . . within one year after such discharge is granted.” The bankruptcy judge revoked discharge on summary judgment.
Sua sponte, the BAP reversed, holding that the one-year time limit is jurisdictional, depriving the bankruptcy court of subject matter jurisdiction. The BAP remanded with instructions to dismiss the revocation proceedings. After the discharge was reinstated, the BAP authorized a direct appeal to the circuit.
Concluding that the BAP had been “wrong as a matter of law,” Judge Watford said that Section 727(e)(1) “is not a ‘jurisdictional’ constraint.” Parroting words of the Supreme Court, he said that “filing deadlines of this sort are ‘quintessential claims-processing rules,’” because “Congress did not clearly state” that the deadline “should be regarded as jurisdictional.”
The non-jurisdictional nature of the limitation results in part from its location in the U.S. Code. Jurisdiction, Judge Watford said, is granted in title 28, while the time limit for revoking discharge is in title 11. He therefore remanded the case to the bankruptcy court with instructions to reinstate the revocation of discharge.
Circuit Judge Morgan Christen concurred to explain why Section 727(e)(1) is a waivable statute of limitations, not a statute of repose that cannot be waived.
In a separate but unpublished opinion, the panel said that the debtor voluntarily transferred the home before bankruptcy and failed to disclose his interest in the property. The appeals court affirmed the BAP for holding that Section 522(g) barred the debtor from claiming an exemption in the home that the trustee recovered. That section allows a debtor to claim an exemption in property recovered by the trustee, but not if the debtor voluntarily transferred and concealed his interest in the property.
The opinions are Weil v. Elliott and Elliott v. Weil (In re Elliott), 16-55359 and 16-60020 (9th Cir. June 14, 2017). To read the published opinion on statutes of limitations, click here. For the unpublished opinion on Section 522(g), click here.