Willms v. Sanderson

A bankruptcy court may not sua sponte extend the filing time of a nondischargeability complaint after the deadline has passed and without either a showing or finding of cause.

On October 2009, Rowe Sanderson filed for Chapter 7 bankruptcy protection. On the last day to file, Hank and Dolly Willms, creditors to Sanderson, moved to extend the filing deadline for either a motion to dismiss or an objection to the petition's discharge. Although the Willmses’ complaint only referenced 11 U.S.C. § 707(b)(3), the bankruptcy court suggested the Willmses might have a claim under § 523(a)(2)(A) and sua sponte extended the time to file it, even though the Willmses did not request said relief. Following a bench trial, the bankruptcy court initially ruled on behalf of the Willmses, but reversed its decision when Sanderson presented additional evidence. The Willmses appealed to the district court, claiming that the bankruptcy court erred in admitting new evidence after trial. Sanderson cross-appealed, claiming the bankruptcy court erred in granting the Willmses the extension to file a nondischargability complaint, and that the Willmses failed to show cause for the extension. The district court affirmed the Willmses’ extension, but reversed the admission of post-trial evidence. Sanderson appealed both rulings. The Ninth Circuit held that the bankruptcy court abused its discretion by granting the Willmses’ time extension without cause, and that the Willmses should never have been authorized to file the § 523 complaint in an untimely manner. Since the filing of the complaint was in error, the panel did not need to review the admission of post-trial evidence. VACATED and REMANDED.