Memorandum of Law in Support of Motion to Reopen Chapter 7 Case to File Student Loan Adversary Proceeding

A pair of Chapter 7 debtors moved to reopen a bankruptcy case filed more than a decade earlier under 11 U.S.C. § 350(b) so they could file an adversary proceeding under 11 U.S.C. § 523(a)(8) to determine the dischargeability of student loan debt. At the hearing, the Court raised two questions about whether reopening was appropriate. This memorandum addresses them.

I. Introduction

The two questions were these:

1. First: does it make sense to reopen a case closed for fifteen years so the debtors can pursue a student loan discharge?
2. Second: were the creditors deprived of something by the fact that the loans were not listed on the original bankruptcy schedules?

Both are fair questions. Neither defeats the motion. This memorandum answers the questions in the order the Court raised them.

One note before it does. Some courts have concluded that filing a § 523(a)(8) adversary in a closed case does not require reopening the case at all.[1]1 On that view, the concerns raised about reopening do not reach the motion; they belong to the adversary, where they are fully preserved.

Even under the more traditional view that reopening is required, the answer is the same. Rule 4007(b) permits a § 523(a)(8) complaint to be filed “at any time,” and the debtors have cause under § 350(b) to reopen so the complaint can be filed. What follows explains why.

II. Rule 4007(b) Lets the Debtors File This Complaint at Any Time, and § 350(b) Lets Them Reopen to File It

Section 350(b) is the statutory door the debtors must pass through to reopen the case. It requires “cause” to “accord relief to the debtor.” It does not set a time limit on that relief.

Rule 4007(b) supplies the cause. That rule lets a debtor file a complaint to determine the dischargeability of a debt “at any time.” Read together, the two provisions do exactly what they say. Courts in this district and elsewhere have applied them to reopen cases anywhere from four to twenty years after closure.[2]2

Could the Court still deny the motion on the ground that “at any time” does not really mean at any time? That reading has a problem. The very next subsection of the rule — Rule 4007(c) — imposes a strict sixty-day deadline for fraud and willful-injury claims under § 523(c). Congress knew how to set a time limit. It chose not to set one for § 523(a)(8).

A reopening motion also asks the Court to weigh fairness to the parties, and on that score the considerations line up.

No other forum can adjudicate § 523(a)(8). No prior proceeding decided anything about these loans. The creditors collected without interruption for fifteen years; reopening does not change their substantive position. And a successful adversary would resolve a debt the debtors cannot otherwise resolve, one that had grown far beyond its original balance.

That leaves the two questions the Court raised: timing and scheduling. The next two sections answer them.

III. Fifteen Years Is a Long Time. It Is Not an Obstacle.

The Court asked at the hearing whether it is strange to reopen a bankruptcy case from many years earlier to pursue a student loan discharge. The framing is fair. Fifteen years is a long time.

But the strangeness fades when you look at what the Court is being asked to do.

Courts reopen cases closed much longer than this one to administer estate property — one reached back 73 years.[3]3 Meanwhile, § 523(a)(8) reopenings happen at intervals of their own, up to twenty years[4]4 or more.

What looks strange, measured by the calendar, looks unremarkable when measured against what the Court actually does here: resolve a question within its jurisdiction. That question — whether the loan imposes undue hardship under § 523(a)(8) — has been subject to the Court’s jurisdiction since the bankruptcy case was filed. The only thing that happened in the intervening years is that the question never got litigated.

A handful of bankruptcy courts have taken a different view and denied reopening at comparable intervals — eighteen months in Kapsin, thirteen years in Root, six years in Porter.[5]5 But none of these decisions engages Rule 4007(b). Each reads a timing limit into § 350(b) that the companion rule rejects: a § 523(a)(8) complaint “may be filed at any time.” This district’s own precedent takes the same view.[6]6

That leaves the Court’s remaining question: why the delay?

The record supported a simple explanation: the debtors had been told by prior counsel that the loans could not be discharged in bankruptcy. They took that advice at face value. That is why the loans were not listed on the schedules, and it is why they did not file an adversary in the years that followed. They did not know they could. When they learned otherwise, they moved.

In short, while a long interval can raise legitimate concerns about strategic delay, those concerns are not a reason to deny reopening. They are a question for the adversary.[7]7

IV. The Creditors Are Not Prejudiced by Reopening

The Court’s remaining concern had two pieces. Was it unfair that the loans were not on the original schedules? And if the adversary goes forward, does the Brunner analysis require the Court to reconstruct a financial picture many years old?

Neither worry holds up. The scheduling omission did not change the creditors’ legal position — then or now. And Brunner does not freeze the Court’s view at the petition date; it asks for a present-tense analysis on a developed record.

A. The Scheduling Omission Changed Nothing

The purpose of scheduling a debt in Chapter 7 is to give the creditor notice of the bankruptcy so it can file a proof of claim and share in whatever assets the estate has to distribute.[8]8 In this scenario, there were none. The bankruptcy was a no-asset case. Whether the loan appeared on Schedule F or not, the creditors’ position on day one of the bankruptcy and the day after closing was the same.

The Third Circuit recognizes the point directly. In a no-asset Chapter 7 with no claims bar date, omitting a debt from the schedules does not except that debt from discharge.[9]9 And that rule is for dischargeable debts. Section 523(a)(8) debts are nondischargeable by operation of law unless the debtor proves undue hardship in an adversary. The loan’s legal status did not depend on whether it was listed. Neither does it now.

The creditors collected on the loan without interruption after closure. Their position was not diminished by the omission. It was unchanged.

B. The Brunner Test Does Not Send the Court Back to the Petition Year

Reconstructing the debtors’ finances as they existed many years earlier would be daunting — and in most cases impossible. Thankfully, that is not what Brunner asks the Court to do.

The test asks three questions. Each looks at time differently.

One looks backward — at the debtors’ engagement with the loan over its history.

One looks forward — at whether the hardship will persist for a significant portion of the repayment term.

One looks at the present — at the debtors’ current ability to maintain a minimal standard of living while repaying the loan.

The Court’s concern seemed to focus on the third. Under that view, “current” would mean what was true when the bankruptcy case was filed.

But that is not what “current” means. The Third Circuit put the first prong in the present tense when it adopted Brunner. It asks whether, “based on current income and expenses,” the debtor can maintain a minimal standard of living while repaying the loans.[10]10 “Current” means what it says — the circumstances that exist when the Court makes the dischargeability determination.

This district has already applied that reading in the posture described here. In In re Crawley, Judge Frank considered the Brunner analysis for a Chapter 7 case reopened nearly four years after closure for a § 523(a)(8) adversary. He held that “once the case has been reopened, the better practice, consistent with the purposes of § 523(a)(8), is for the court to consider all of the evidence available as of the trial date regarding the debtor’s circumstances.”[11]11 He drew that reasoning from In re Walker, and the language he adopted speaks directly to this concern:

Even if there are no changed circumstances, it makes no sense to require a court conducting a trial in 2008, for example, to go back to 2004 and make projections based on the 2004 facts, when it has the actual facts as they exist in 2008.[12]12

There is a quieter point worth making.

The second Brunner prong asks the Court to predict whether the debtors’ hardship will persist. In many § 523(a)(8) cases that is difficult — the court must forecast decades of financial life from a snapshot. In a case reopened long after closure, the opposite is true. A substantial part of the repayment period has already played out, and the evidentiary record available at the adversary reflects that reality rather than speculating about it. A long interval does not complicate the second-prong analysis. It simplifies it.

That reasoning answers the concern. A Brunner analysis frozen to the petition year does not protect the creditors. It asks the Court to make predictions about a future that has already happened — to guess whether the debtors’ hardship would persist when the record of the intervening years already answers the question. It blinds the Court to facts it knows are true simply because those facts emerged after closure.

V. Conclusion

Two questions came up at the hearing. This memorandum has answered both.

Fifteen years is a long time, but Rule 4007(b) does not set a time limit — and the very next subsection of the rule shows Congress knew how to set one when it wanted. The scheduling omission changed nothing about the creditors’ legal position; they collected continuously after closure, and § 523(a)(8) kept the loan outside the discharge by operation of law, whether it was listed or not. And the Brunner analysis does not require the Court to reconstruct a financial picture many years old. Crawley and Walker answer that question directly: once the case is reopened, the Court considers the evidence available at the trial date.

For those reasons, the debtors would request that the Court reopen the Chapter 7 case under 11 U.S.C. § 350(b) and Federal Rule of Bankruptcy Procedure 5010 so they may file an adversary proceeding under 11 U.S.C. § 523(a)(8).