Johnson
Filing
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ORDER signed by District Judge John A. Mendez on 1/3/2017 AFFIRMING the Bankruptcy Court's judgment denying the appellant's Motion to Set Aside Discharge. CASE CLOSED. (Michel, G.)
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UNITED STATES DISTRICT COURT
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EASTERN DISTRICT OF CALIFORNIA
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In re
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Jeffrey Brian Johnson,
No.
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Appellant.
2:15-cv-00990-JAM
ORDER AFFIRMING BANKRUPTCY
COURT’S JUDGMENT
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This appeal arose from Jeffrey Brian Johnson’s Chapter 7
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bankruptcy.
After the Chapter 7 Trustee filed a Report of No
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Distribution, the bankruptcy court discharged Johnson’s debt
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(“Discharge Order”).
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moved to set it aside.
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motion, Johnson filed an appeal with this Court. 1
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Although his appeal is unopposed
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has considered this appeal on its merits.
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///
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///
Surprised by the Discharge Order, Johnson
After the bankruptcy court denied his
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ECF No. 1.
the Court is required to and
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This appeal was determined to be suitable for decision without
oral argument. E.D. Cal. L.R. 230(g).
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The Chapter 7 Trustee is no longer a party to this case. Min.
Order, ECF No. 17. And the United States Trustee filed a
Statement of Non-Participation. ECF No. 22.
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I.
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FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND
Johnson filed for bankruptcy on November 18, 2013.
App.,
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ECF No. 19-1, at 3-4.
Three days later, Johnson received a
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Notice of Chapter 7 Bankruptcy Case, Meeting of Creditors &
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Deadlines (“Deadline Notice”).
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at Case No. 2:13-bk-34696, ECF No. 18.
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important dates, including the filing deadline to object to a
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debtor’s discharge:
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Deadline Notice, located at Case No. 2:13-bk-34696, ECF No. 8.
Certificate of Mailing, located
That document contained
February 10, 2014 (“Filing Deadline”).
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About one month later, the Chapter 7 Trustee filed a Report of No
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Distribution, concluding that Johnson had “no funds available
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from the estate for distribution to creditors.”
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App. at 7.
Because Johnson’s estate had been fully administered, the
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only remaining issue before the bankruptcy court was whether it
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should discharge Johnson’s debt.
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convert his bankruptcy from Chapter 7 to Chapter 13.
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15.
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prejudice on procedural grounds.
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March 4, 2014, the bankruptcy court discharged Johnson’s debt.
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Id. at 25-26.
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Johnson’s second motion to convert from Chapter 7 to Chapter 13.
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See id. at 27-28, 175.
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Meanwhile, Johnson moved to
App. at 13-
The bankruptcy court denied Johnson’s motion without
See id. at 23-24.
Then, on
The next day, the bankruptcy court clerk entered
Eight days later, Johnson moved to set aside the Discharge
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Order (“Motion to Set Aside Discharge”).
App. at 44-45.
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bankruptcy court denied Johnson’s motion and dismissed Johnson’s
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second conversion motion.
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the United States District Court for the Eastern District of
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California.
See id. at 73-77.
The
Johnson appealed to
The district court vacated the bankruptcy court’s
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order denying Johnson’s motion and remanded the case so the
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bankruptcy court could determine (1) whether the bankruptcy court
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committed a clerical error under Fed. R. Civ. P. 60(a) when it
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discharged Johnson’s debt, and (2) whether Johnson’s medical
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treatment between February and March of 2014 constituted
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excusable neglect under Fed. R. Civ. P. 60(b)(1).
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Edmonds, No. 2:14-cv-00889, 2015 WL 430697, at *3 (E.D. Cal. Feb.
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2, 2015).
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See Johnson v.
On remand, the bankruptcy court addressed these questions
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and again denied Johnson’s Motion to Set Aside Discharge.
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App. at 109-116.
See
Johnson now appeals.
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II.
OPINION
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A.
Jurisdiction
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District courts have appellate jurisdiction over a
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bankruptcy court’s final judgments, orders, and decrees.
See 28
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U.S.C. § 158(a)(1).
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to set aside a prior judgment are “final.”
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2015 WL 430697 at *1; In re Federico, No. 2:08-cv-2182, 2009 WL
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2905855, at *1 (E.D. Cal. Sept. 8, 2009).
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appeal pertains to a final judgment, this Court has
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jurisdiction.
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B.
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When reviewing a bankruptcy court’s decision, a district
Bankruptcy court decisions denying motions
See, e.g., Johnson,
Because Johnson’s
Standard of Review
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court functions as an appellate court and applies the standard
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of review generally applied in federal appellate courts.
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re Crystal Props., Ltd., L.P., 268 F.3d 743, 755 (9th Cir. 2001)
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(internal citations omitted).
See In
Appellate courts apply a “de novo
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review of legal conclusions and clear error review of factual
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findings” when reviewing discharge orders.
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131 F.3d 788, 792 (9th Cir. 1997).
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C.
See In re Bammer,
Legal Standard
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1.
Federal Rule of Civil Procedure 60(a)
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A “court may correct a clerical mistake or a mistake
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arising from oversight or omission whenever one is found in a
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judgment, order, or other part of the record.”
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60(a).
Fed. R. Civ. P.
In other words, Rule 60(a) “empowers a [c]ourt to
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correct its own clerical mistakes.”
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718 n.1 (B.A.P. 9th Cir. 1989).
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60(a) applicable to bankruptcy cases.
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9024; In re Burke, 95 B.R. at 718.
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2.
In re Burke, 95 B.R. 716,
Bankruptcy Rule 9024 makes Rule
See Fed. R. Bankr. P.
Federal Rule of Civil Procedure 60(b)(1)
A “court may relieve a party or its legal representative
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from a final judgment, order, or proceeding for . . . mistake,
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inadvertence, surprise, or excusable neglect.”
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60(b)(1).
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factor test to assess whether missing a filing deadline
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constitutes excusable neglect.
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Brunswick Assocs. Ltd., 507 U.S. 380 (1993).
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assessment is “an equitable one, taking account of all relevant
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circumstances surrounding the party’s omission.
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. . .the danger of prejudice to the debtor, the length of the
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delay and its potential impact on judicial proceedings, the
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reason for the delay, including whether it was within the
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reasonable control of the movant, and whether the movant acted
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in good faith.”
Fed. R. Civ. P.
The United States Supreme Court established a four-
See Pioneer Inv. Servs. Co. v.
“[A]t bottom,” the
These include
Id. at 395 (internal citation omitted).
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The
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Supreme Court emphasized that “inadvertence, ignorance of the
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rules, or mistakes construing the rules do not usually
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constitute ‘excusable’ neglect.”
See id. at 392.
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Although Pioneer discussed excusable neglect under
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Bankruptcy Rule 9006(b), the Ninth Circuit has held that the
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Pioneer standard applies to Rule 60(b)(1).
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Riviera Hotel & Casino, 116 F.3d 379, 381 (9th Cir. 1997).
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short, Pioneer sets an equitable framework from which courts
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should examine all circumstances involved rather than holding
See Briones v.
In
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that any single circumstance compels a particular result despite
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other factors.
See Briones, 116 F.3d at 382 n.2.
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D.
Analysis
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Johnson makes two arguments to support his appeal.
First,
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Johnson says that the bankruptcy court made a clerical mistake
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under Rule 60(a) when it discharged his debt.
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Br., ECF No. 19, at 15.
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filing constituted excusable neglect under Rule 60(b)(1).
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id. at 17.
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court’s decision to deny his Motion to Set Aside Discharge and
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(2) to vacate the Discharge Order.
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See Appellant
Second, Johnson argues that his late
See
Johnson asks this Court to (1) vacate the bankruptcy
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See id. at 23.
Rule 60(a)
Johnson argues that the bankruptcy court made a clerical
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mistake when it entered his second conversion motion the day
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after the court discharged his debt.
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maintains that had the bankruptcy court entered his second
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conversion motion a day earlier, the court would not have
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discharged his debt.
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Appellant Br. at 15.
He
See id.
The bankruptcy court did not make a clerical mistake when
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it discharged Johnson’s debt.
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prescribes the conditions for triggering a Chapter 7 discharge:
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“In a chapter 7 case, on expiration of the times fixed for
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objecting to discharge and for filing a motion to dismiss the
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case under Rule 1017(e), the court shall forthwith grant the
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discharge.”
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Bankruptcy Rule 4004(c)(1)
Fed. R. Bankr. P. 4004(c)(1) (emphasis added).
But, like with most general rules, there are several
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exceptions.
A bankruptcy court “shall not grant” a Chapter 7
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discharge when, for instance, the debtor is not an individual;
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when someone files a complaint or motion under § 727(a)(8) or
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(a)(9); when the debtor files a waiver under § 727(a)(10); when
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a motion to dismiss the case under § 707 is pending; when a
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motion to extend the time to object to a discharge or to dismiss
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the case is pending; when the debtor has not filed a statement
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showing that he completed a personal financial management
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course; or when a motion to delay or postpone discharge under
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§ 727(a)(12) is pending.
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(F), (H)-(I). 3
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See Fed. R. Bankr. P. 4004(c)(1)(A)-
Here, all requisite conditions for entering a discharge
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were satisfied, and no exception applies.
Johnson is an
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individual.
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a discharge.
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motions to dismiss or to extend time to object to or delay
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discharge.
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a personal financial management course.
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Management Course Certificate, located at Case No. 2:13-bk-
He did not file a complaint or motion objecting to
He did not file a waiver.
There were no pending
And Johnson filed a certificate showing he completed
See Financial
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This rule contains several more exceptions inapplicable here.
See generally Fed. R. Bankr. P. 4004(c)(1)(A)-(L).
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34696, ECF No. 60.
This case differs from Burke, where the Ninth Circuit
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B.A.P. found a clerical mistake under Rule 60(a).
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In Burke, the bankruptcy court clerk initially scheduled the
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wrong date for the creditors’ meeting, but then issued another
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order rescheduling the meeting for the proper date, explaining
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that the first order was incorrect “[d]ue to inadvertence and
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clerical error.”
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ocurred here.
Id. at 716-17.
Id. at 718.
No such scheduling error
Johnson could have objected to a discharge, but
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he did not.
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7 to Chapter 13.
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convert is not an enumerated exception under Bankruptcy Rule
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4004(c)(1).
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So, once the Filing Deadline expired, the bankruptcy court
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properly discharged Johnson’s debt because no enumerated
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exception applied.
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Instead, he moved to convert his case from Chapter
See App. at 13-15.
A pending motion to
See generally Fed. R. Bankr. P. 4004(c)(1)(A)-(L).
Johnson also maintains that the bankruptcy court “confuses
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the law to the facts” because it cited irrelevant bankruptcy
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rules like Rule 4004(c)(1).
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Johnson who is confused.
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other statute or rule it cites, provides the relevant context
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upon which to analyze whether entering the discharge was a
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clerical mistake under Rule 60(a).
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bankruptcy court included these rules in its Order to explain
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how a Chapter 7 discharge occurs, and then applied that
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procedural framework to Johnson’s case to show why entering the
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discharge was not a clerical mistake under Rule 60(a).
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See Appellant Br. at 16.
But it is
Bankruptcy Rule 4004(c)(1), and any
In other words, the
In sum, the bankruptcy court did not make a clerical
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mistake when it discharged Johnson’s debt but did what the law
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requires.
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2.
Rule 60(b)(1)
Johnson offers Rule 60(b)(1) as another basis to vacate the
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bankruptcy court’s decision to deny his Motion to Set Aside
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Discharge.
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medical injury on February 18, 2014 made him “not cognitive” of
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the relevant bankruptcy rules detailing the procedure to convert
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from Chapter 7 to Chapter 13.
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See Appellant Br. at 17-23.
For the reasons discussed below, Johnson’s medical issues
do not constitute excusable neglect.
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Specifically, Johnson argues that an unexpected
a.
Prejudice
Prejudice requires greater harm than simply that relief
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would delay a case’s resolution.
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F.3d 1188, 1196 (9th Cir. 2009) (internal citation omitted).
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Yet Johnson maintains that he cannot obtain the relief he wants
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(a Chapter 13 conversion) until this Court vacates his Chapter 7
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discharge.
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Lemoge v. United States, 587
See Appellant Br. at 17.
The Discharge Order has not prejudiced Johnson because he
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can still move to convert to Chapter 13.
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allows a Chapter 7 debtor to “convert a case under this chapter
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to a case under chapter . . . 13 of this title at any time.”
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U.S.C. § 706(a) (emphasis added).
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absolute right to convert to Chapter 13.
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Citizens Bank of Massachusetts, 549 U.S. 365, 372-73 (2007)
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(holding that a debtor’s bad faith could stop him from
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qualifying as a debtor under Chapter 13); In re Rosson, 545 F.3d
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764, 767-68 (9th Cir. 2008) (same).
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The Bankruptcy Code
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But a debtor does not have an
See Marrama v.
Nevertheless, as long as
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Johnson follows procedural rules and establishes his eligibility
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for a Chapter 13 conversion, his Chapter 7 discharge will not
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preclude him from obtaining a Chapter 13 conversion which is the
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relief he apparently wants.
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See 11 U.S.C. § 706(a).
Johnson’s creditors, however, would suffer prejudice if
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this Court vacated the Discharge Order.
Discharging a debt
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effectively ends the case.
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noted, “[t]he creditors have relied on [Johnson’s] discharge to
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finalize their accounts with [him] and make appropriate credit
As the bankruptcy court correctly
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reporting of [him].”
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“would require notifying the creditors that the discharge of
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[Johnson’s] debts has been reversed, necessitating their
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reopening of [Johnson’s] accounts, revisiting collection
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activities and reversing their credit reporting of [Johnson].”
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Id.
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App. at 113.
Vacating the Discharge Order
In short, Johnson has not shown that he would suffer
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prejudice if this Court affirmed the bankruptcy court’s
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decision.
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See 11 U.S.C. § 706(a).
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transcript, the bankruptcy court may grant Johnson’s conversion
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motion, provided Johnson satisfies the requisite conditions.
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See App. at 146 (“I will convert it, if I get that motion and
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it’s properly noticed to your creditors and you establish your
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eligibility for Chapter 13.”).
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A discharge does not necessarily preclude conversion.
b.
And, as evidenced by the hearing
Length of Delay and Resulting Effect
Rule 60(c)(1) requires that a Rule 60(b) motion be made
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“within a reasonable time” and “no more than a year after the
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entry of the judgment or order or the date of the preceding
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year.”
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1196.
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of each case, taking into consideration the interest in
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finality, the reason for delay, the practical ability of the
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litigant to learn earlier of the grounds relied upon, and
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prejudice to the other parties.”
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(citing Ashford v. Steuart, 657 F.2d 1053, 1055 (9th Cir. 1981)
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(per curiam) (internal quotation marks omitted)).
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Fed. R. Civ. P. 60(c)(1).
See also Lemoges, 587 F.3d at
“What constitutes reasonable time depends upon the facts
Lemoges, 587 F.3d at 1196-97
Johnson never filed a motion to object to, delay, or waive
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discharge.
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after the court entered it.
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falls within the “one year” limit, the Lemoges’s factors show
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that Johnson did not object within a “reasonable time.”
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the same reliance argument outlined above supports two factors
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that favor affirming the discharge:
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parties (here, Johnson’s creditors) and (2) the interest in
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finality.
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Johnson had the practical ability to know about the Filing
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Deadline, and his medical issues do not justify missing that
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deadline.
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The first time he opposed discharge came 8 days
Although this
First,
(1) prejudice to other
Second, the last two factors favor affirmance because
c.
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See App. at 44-45.
Reason for Delay
Johnson cites his medical problems for missing the Filing
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Deadline, arguing that his medical issues made him “not
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cognitive” of the relevant legal rules.
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19.
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Lemoges.
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attorney’s medical problems explained why he did not respond to
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the court’s order to show cause and why he did not file the
See Appellant Br. at
Johnson parallels his situation to the attorney’s in
In that case, the Ninth Circuit concluded that the
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motion to set aside the dismissal until 7 months later.
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at 1197.
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attorney’s medical issues and his late filing.
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See id.
The Ninth Circuit found a causal link between the
No such causal link exists here.
Johnson had known about
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the February 10, 2014 deadline since November 21, 2013.
See
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Certificate of Mailing, located at Case No. 2:13-bk-34696, ECF
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No. 18.
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Filing Deadline.
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bk-34696, ECF No. 8 (February 10, 2014 deadline to file
And Johnson’s medical problems began 8 days after the
See Deadline Notice, located at Case No. 2:13-
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objection to discharge) (emphasis added); Appellant Br. at 17
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(“[U]nexpected injury occurred on February 18, 2014, demanding
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medical attention.”).
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on February 20, 2014).
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Johnson has not shown that his medical treatment made him miss a
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deadline about which he had known for months.
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Deadline was within Johnson’s “reasonable control.”
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507 U.S. at 395.
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rules to waive or delay or object to a discharge, Johnson twice
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moved to convert—an action that does not affect whether a court
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discharges a debt.
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Johnson cannot cite his medical issues for his confusion (and
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subsequent delay in objecting to discharge) because there exists
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no causal link between those issues and his late filing.
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d.
See also App. at 63 (admitted to hospital
Making the Filing
Pioneer,
But, rather than following the procedural
See Fed. R. Bankr. P. 4004(c)(1)(A)-(L).
Good Faith
“[A] late filing will ordinarily not be excused by
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negligence.
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following court rules.”
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So, unlike the attorney in Lemoges,
. . . [and] pro se litigants are not excused from
Briones, 116 F.3d at 382.
Again, Johnson knew about the Filing Deadline.
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See
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Certificate of Mailing, located at Case No. 2:13-bk-34696, ECF
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No. 18.
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instead, he filed motions that have no bearing on the issue.
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App. at 13-15, 27-28 (first and second conversion motions).
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Johnson does not dispute these facts.
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medical problems to justify his late filing.
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at 17-23.
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Johnson’s medical problems and his late filing.
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II(D)(2)(c).
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Yet he did not file any documents that affect discharge;
See
He relies only on his
See Appellant Br.
But, as explained above, no causal link exists between
Once again, this case differs from Lemoges.
See supra Part
In Lemoges, no
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evidence suggested that the attorney had acted with anything less
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than good faith, given the causal link between his medical
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problems and his late filing.
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after the fact, cite his medical issues to justify his late
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filing.
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but, under these facts, he cannot argue, in good faith, that it
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was because of his medical condition.
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Id. at 1197.
Johnson cannot now,
He may have been confused about some procedural rules,
After applying the Pioneer factors, the Court concludes that
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Johnson has not shown excusable neglect under Rule 60(b)(1).
He
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knew about the Filing Deadline, but focused instead on converting
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his case.
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the deadline to expire.
He took steps to accomplish that goal, and he allowed
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III.
ORDER
The Court acknowledges Johnson’s genuine desire to convert
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his case from Chapter 7 to Chapter 13.
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blinded Johnson from the real issue.
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not prevent him from obtaining what he wants—a Chapter 13
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But that desire has
A Chapter 7 discharge does
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conversion.
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expertise, rather than blaming the court clerk for making an
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alleged clerical mistake, rather than invoking excusable neglect,
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Johnson should simply do what the law requires.
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judge made that explicitly clear at the hearing:
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Rather than questioning the bankruptcy judge’s
The bankruptcy
You seem to believe you’re not going to get a
Chapter 13 discharge if you got a Chapter 7
discharge. As long as it’s the same case,
you will get a discharge. . . . So you need
to notice the motion to convert to Chapter
13. All right. And as long as you do that
and you establish that your debts are less
than the limits in 109(e) and that you have
regular income, such that you meet the
definition of a Chapter 13 debtor, also in
Section 109, I will grant the motion. And if
I grant the motion and you confirm a plan and
you complete the payments under the plan, you
will get a Chapter 13 discharge.
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15
App. at 149, 153.
For the reasons set forth above, the Court AFFIRMS the
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bankruptcy court’s judgment to deny Johnson’s Motion to Set Aside
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Discharge.
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IT IS SO ORDERED.
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Dated: January 3, 2017
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