Deadlines and Equity: Timeliness in Attacking Discharge of Debt and Debtors

Discharge and dischargeability is a topic we have discussed frequently in prior client alerts. See Non Dischargeable Debts; see also Dischargeable Debt? Not So Fast! – The Requirements To “Look Behind” Debts To Determine Their True Nature.

While debts get discharged as a whole and in part under section 523 of the Bankruptcy Code (the “Code”), the Code creates exceptions to the discharge of certain types of debts, while section 727 of the Code permits the bankruptcy court to deny the discharge of a debtor. See Debtors Behaving Badly: Non-Dischargeability of Debt Based on Debtor’s “Bad Acts”.

Creditors may ask to declare a certain debt non-dischargeable if it arises from (i) money, property or services provided to the debtor obtained by false pretenses, false representation or actual fraud (11 U.S.C. § 523(a)(2)(A)); (ii) debtor’s fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny (11 U.S.C. § 523(a)(4)); or (iii) debtor’s willful and malicious injury to another entity or property of another entity. (11 U.S.C. § 523(a)(6)). See Alex Jones and Non-dischargeable Debt.

For a creditor to ask the court to declare a debt non-dischargeable, the creditor must file a complaint within 60-days after the Section 341 first meeting of creditors, as set forth in the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”). See Fed. R. Bankr. P. 4007(c).

Although the Bankruptcy Rules sets forth this timeframe, the Code allows the court to invoke its equitable powers and may extend the 60-day objection period in order to get the right result. See 11 U.S.C. § 105(a).

We have written extensively on the importance of adhering to deadlines, along with the court’s ability to invoke its equitable powers. See When is it Due: A Cautionary Tale for Business and Legal Professionals; Don’t Miss the Bar Date! The Importance of Timely Filing Bankruptcy Proofs of Claim; Recent Bankruptcy Court Decisions of Statutory Interpretation Reiterate the Importance of Equitable Consideration in Bankruptcy Cases; “Excusable Neglect”: When Missing a Deadline May Not Be Fatal; Neglecting a Deadline May Be Excusable. 

However, a new issue has arisen:

What happens when a court mistakenly enters a wrong docket entry setting forth the deadline to object to a debt’s discharge? 

May the court invoke its equitable powers to extend the deadline for a creditor who wished to object to the dischargeabililty of a debt, but “relied” on an error made by the court.

In a recent case, Bankruptcy Judge Patricia M. Mayer of Reading, Pennsylvania, declined to invoke the court’s equitable powers to extend the objection deadline for a creditor.  In Legal Access Plans LLC v. Millinghausen (In re Millinghausen), a creditor was notified by the court of a debtor’s chapter 7 filing and that the date to object to discharge was September 23, 2024. Legal Access Plans LLC v. Millinghausen (In re Millinghausen), Bky. No. 24-12183 (PMM), Adv. No. 24-00140 (PMM) (Bankr. E.D. Pa. April 23, 2025).  Later, the court entered an order extending the deadline for the trustee and the U.S. Trustee to object to discharge or dischargeability until November 23, 2024. Id. 

Inadvertently, the court entered at the top of the docket that the objection deadline was now November 23, 2024, without any indication as to who it applied, and, therefore, the creditor filed a complaint objecting to discharge of a debt on November 23, 2024. Id.  However, this extension did not apply to creditors. Id.

The creditor argued that it was reasonable for them to rely on the docket entry and that the court should use its equitable powers to extend the deadline. Id. The court disagreed. Id.

First, Judge Mayer explained that the creditor received timely notice of the correct deadline date when they received the Official Form 309A from the clerk’s office. Id.

Second, the creditor did not actually receive notice of the incorrect date as they did not receive an order from the court or a notice from the clerk’s office of the changed date. Id.

Further, Judge Mayer explained that the creditor did not even call the clerk’s office or speak to the trustee to confirm whether the deadline date had actually changed. Id. Finally, Judge Mayer explained that the creditor has a duty to investigate the relevant deadlines. Id. Judge Mayer stated “[k]knowledge of the relevant deadlines prescribed by the Code and Rules are ground rules, not optional guidelines, for asserting one’s rights in this federal court.” Id.

Judge Mayer acknowledged the creditor’s equitable argument, along with recognizing that either adhering to the deadline or extending the deadline would not produce a “good outcome.” Id.

However, in balancing the prejudices, Judge Mayer declined to use her equitable powers and held that “the Debtor’s reliance on the known and prescribed timeline for his fresh start is more compelling than the Plaintiff’s unreasonable reliance on a plainly incorrect deadline.” Id.

Equity plays a significant role in the law generally, and all the more so in bankruptcy law.  However, a court’s equitable powers will only be invoked in certain situations to prevent inequitable results.

Please note this is a general overview of developments in the law and does not constitute legal advice.  Nothing herein creates an attorney-client relationship between the sender and the recipient.  If you have any questions regarding the provisions discussed above, or any other aspect of bankruptcy law, please contact Michael H. Traison (mtraison@cullenllp.com) at 312.860.4230 or Kelly McNamee (kmcnamee@cullenllp.com) at 516.296.9166.