Equitable Tolling and Relation Back-Objection to Discharge

Several years back I wrote an article for the American Bankruptcy Institute on informal proofs of claim. The ABI article, which can be found here, discussed how a pleading filed before a proof of claim bar date (i.e., certification filed in support of a stay relief motion) could save the day when a formal proof of claim is filed after the bar date. In a somewhat analogous case, the United States Bankruptcy Court for the District of New Jersey recently held that an adversary complaint objecting to the discharge of a debt filed after the objection deadline would relate back to the filing date of a motion objecting to the discharge filed before the deadline. DeMaria v Peters, Adversary Proceeding No. 14-01002 (MPK).

In Peters, a creditor obtained a judgment against an individual in state court. After engaging in post-judgment discovery, the defendant filed a petition under Chapter 7 of the United States Bankruptcy Code. When the petition was filed, the Bankruptcy Court set a deadline (the “Bar Date”) to object to the dischargeability of any debt.

One week before the Bar Date, the creditor filed a motion (“Objection Motion”) in the bankruptcy case seeking to hold the judgment non-dischargeable. Several days later and again prior to the Bar Date, the creditor filed a proof of claim with the United States Bankruptcy Court. However, a formal complaint objecting to the discharge of the debt was not filed until 13 days after the Bar Date.

The debtor filed a motion to dismiss the complaint since it was filed after the Bar Date. Although there was no dispute that the complaint was filed after the Bar Date, the United States Bankruptcy Court allowed the late filed complaint to “relate back” to the date the Objection Motion was filed. In making its decision, the United States Bankruptcy Court relied upon Third Circuit law which allows a court to toll the Bar Date when the equities warrant. Finding there was no prejudice to the debtor, the Bankruptcy Court equitably tolled the Bar Date, allowed the Complaint to be filed, and held that the filing date related back to the date the Objection Motion was filed.

Creditors should not rely heavily upon this decision. Although supported by Third Circuit law, bar dates in bankruptcy cases are generally strictly enforced. However, if a Bar Date is missed and a creditor wishes to file a complaint objecting to discharge, counsel should thoroughly review all pleadings filed in the case to determine whether or not the creditor placed the debtor on notice of the claim prior to the bar date. If so, the Peters decision may save the day.