The bankruptcy court did not abuse its discretion in declining to reopen the debtor’s case sixteen years after its closure to administer an asset the debtor did not own until after his bankruptcy case closed. Gamez v. Lopez (In re Lopez), No. 22-2379 (E.D.N.Y. March 9, 2023).
In the debtor’s chapter 7 bankruptcy, he did not list any real property on his schedules, nor did he list Mr. Gamez, the appellant in this appeal, as a creditor. In January, 2006, the debtor received his discharge and the case was closed with no distribution. In November, 2006, Mr. Gamez deeded real property to himself and to Lopez, each with 50% interest. Apparently, the debtor had been living in this property at the time of his petition. In 2010, the debtor initiated a partition action with respect to the property. That case settled in 2015. Litigation concerning the settlement agreement kept the case before the state court in the following years.
In 2021, Mr. Gamez moved to reopen the debtor’s bankruptcy case in order to allow him to seek a stay of all state court proceedings and to have the trustee administer the property. The bankruptcy court declined to reopen the case.
Section 350(b) permits a bankruptcy court, at its discretion, to reopen a bankruptcy case “for cause.” Factors the district court found relevant in this appeal included: 1) the length of time the case was closed; 2) whether a state court would be the appropriate forum; 3) the extent of the benefit to the debtor by reopening; 4) whether it was clear at the outset that no relief would be forthcoming to the debtor by granting the motion, and 5) “the availability of relief in another forum [and] whether the estate has been fully administered.”
Applying these factors, the district court found the bankruptcy court did not abuse its discretion in denying Mr. Gamez’s motion. The court noted that the motion came over sixteen years after the case was closed. More significantly, the court pointed out that, contrary to Mr. Gamez’s assertion, there was no evidence that, at the time the debtor filed for bankruptcy, he had any ownership interest in the property. “Inasmuch as Lopez’s ownership in the property occurred after his Chapter 7 bankruptcy case closed, and there has been ongoing litigation in the state courts concerning the subject property since 2010, the Bankruptcy Court properly determined that the New York state courts were the more appropriate forum.”
Mr. Gamez filed a notice of appeal to the Second Circuit on March 10. Case no. 23-326.
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Tags: Property of Estate, motion to reopen
