On an issue where the circuits are divided, Bankruptcy Judge Patricia M. Mayer of Reading, Pa., decided that she could not employ equity to extend a deadline that had expired — in this case, the deadline for objections to dischargeability.

After years of litigation and arbitration, the creditor won a judgment in state court for about $450,000. The individual debtor responded with a chapter 7 petition. The creditor received a notice from the court giving the date for the meeting of creditors and saying that the deadline for objections to dischargeability was 60 days later, on September 23.

The creditor attended the creditors’ meeting, where there was talk of the dischargeability deadline and discussions about an extension. The court later entered an order extending the deadline for the trustee and the U.S. Trustee to object to discharge or dischargeability until November 23. The subsequent order did not extend the deadline for creditors.

Incorrectly, the top of the docket said that the dischargeability deadline was November 23. The creditor filed a complaint on November 23 objecting to discharge of the $450,000 debt.

The debtor responded with a motion to dismiss, which Judge Mayer granted in her opinion on April 23. In opposition, the creditor contended that the court should use its powers of equity to extend the deadline, given the creditor’s reliance on the docket entry.

The Circuit Split

Beginning discussion of the merits, Judge Mayer recited how the dischargeability deadline, 60 days following the meeting of creditors, is set by Bankruptcy Rule 4007(c). Citing the Collier treatise, she went on to say that the deadline “does not change, even if the meeting is continued.” Furthermore, “excusable neglect does not apply to Rule 4007” as grounds for an extension of an expired deadline, she said.

On the other hand, “The relevant deadline may be extended for equitable reasons pursuant to § 105(a) of the Code, which allows the court to ‘issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title,’” Judge Mayer said. Nonetheless, she added, “[A]n equitable remedy may only be employed to further the goals and structure of the Code and cannot be used ‘to disregard unambiguous statutory language.’”

“Not surprisingly,” Judge Mayer identified a circuit split. Citing the Sixth and Tenth Circuits, she said, “Some courts, in analyzing circumstances similar to this in which an incorrect bar date was issued or noticed, have held that statutory deadlines may be extended.” Citing the Eleventh Circuit, “Other courts have strictly enforced the statutory deadline, declining to allow extra time due to a court error or miscommunication,” she said.

No Reasonable Reliance on the Docket

“Because the language of the Rules is not discretionary,” Judge Mayer said that the creditor “must appeal to a sense of fairness” and the court’s powers under Section 105(a). She distinguished the facts in a case where the Bankruptcy Appellate Panel for the Eighth Circuit extended the dischargeability deadline to avoid an “unjust result” when the parties had relied on information issued by the bankruptcy court. In re Perkins, 271 B.R. 607 (B.A.P. 8th Cir. 2002).

In Perkins, Judge Mayer said that reliance on the court was reasonable, but not in the case before her, for three reasons.

First, the creditor had received the formal notice with the correct objection deadline. Second, the creditor “did not actually receive ‘notice’ of the incorrect bar date.” Third, the creditor “maintained a duty to investigate the relevant deadlines.” If the creditor was not sure about the deadline, the creditor should have read the order, which extended the deadline only for the trustee and the U.S. Trustee.

Judge Mayer declined to use her equitable powers under Section 105(a) when the creditor’s “failure to comply with the deadline was not the result of reasonable reliance.”

Balancing the Prejudices

Acknowledging that the creditor’s “equitable argument is not without appeal,” Judge Mayer said that courts “allowing an extension due to an internal court error generally point to the unfairness of a different result.”

Neither adhering to the deadline nor extending the deadline was a “good outcome,” Judge Mayer said. Extending the deadline would mean that the debtor could not rely on deadlines set up by the court. Refusing to expand the deadline would mean that the creditor would “not be able to rely on a court pronouncement of the relevant deadline.”

Balancing the relative prejudices, Judge Mayer decided that “the Debtor’s reliance on the known and prescribed timeline for his fresh start is more compelling than the [creditor’s] unreasonable reliance on a plainly incorrect deadline.” As a result, she granted the motion to dismiss with prejudice.