Motion to Revoke Discharge Time-Barred for Being Twelve Years Late

The following is a case update written by Hale Andrew Antico, Chief Counsel of Antico Law Firm, analyzing In re Tran and Le, 2025 WL 1255580 (April 30, 2025), a recent case of interest:

Summary

The Bankruptcy Appellate Panel of the Ninth Circuit (“BAP”) affirmed the bankruptcy court’s ruling that the motion to revoke the discharge of Debtors was time-barred in In re Tran and Le, because the motion was filed twelve years after Debtors received their discharge and the case was last closed.

To read the full published decision, click here.

Facts

In 2005, Chaowalit Koopongskul (“Appellant”) purchased an investment property from Danny Le (“Debtor”).  Appellant alleged that Le failed to disclose that the property was subject to building code violations and a compliance demand order.  Appellant sued Le in state court.

In November 2009, Appellant obtained a default judgment against Le for $77,400. However, Le had filed a joint Chapter 7 bankruptcy case weeks earlier in October 2009, making the default judgment and writ of execution void, as they were obtained after the automatic stay went into effect.

Although Debtor and Mai Hoang Tran (“Joint Debtor”) listed the state court lawsuit in the Statement of Financial Affairs (“SOFA”), they did not list Appellant as a creditor on Schedule F nor on the creditor matrix to get notice of the bankruptcy filing.  The Debtors also did not disclose the 2005 sale in the SOFA.

On March 30, 2010, Debtors received their Chapter 7 discharge. However, just a few days before that, Debtors amended Schedule F to include Appellant and the debt related to the default judgment. The case was closed on March 31, 2010;  the next day, Appellant was sent a copy of the discharge order.

In November 2010, Appellant reopened the case and thereafter filed numerous efforts to obtain a determination that the default judgment was nondischargeable.  The case was closed in May 2012 after Appellant made multiple missteps. These errors included failure to file the adversary proceeding timely.  In 2015, when he finally did file the adversary timely, it was dismissed for failure to serve Debtors and prosecute the case. Appellant then spent the next few years trying to vacate the dismissal of the untimely adversary, causing the bankruptcy court to warn Appellant that further efforts to seek reconsideration would result in sanctions.

Fast forward to February 2024, when Appellant filed, in the then-closed bankruptcy case, a Motion to Revoke the discharge of Debtors (“Motion to Revoke”). The Appellant’s grounds for filing the Motion to Revoke were almost identical to those in the failed/dismissed 2015 adversary complaint: seeking a determination of nondischargeability for the debt arising from, again, the default judgment. The Appellant’s reasons for revoking the discharge included: (1) Debtors’ failure to list Appellant as a creditor until the eve of discharge; (2) Appellant’s learning of the case only after the discharge; and (3) that it was fraudulent for the Debtors’ not to list the 2005 property sale and its resulting $225,000 net profit in their SOFA. The Motion to Revoke did not state under which statute Appellant was seeking relief: § 727(d)(1), (2), (3), or (4). The bankruptcy court denied the Motion to Revoke, ruling that it was time-barred. Appellant appealed to the BAP, which affirmed the bankruptcy court.

Reasoning

The Statute

In affirming the bankruptcy court, the BAP first examined which statute might be properly invoked. The BAP noted that while Appellant failed to state under which paragraph(s) of § 727(d) he was seeking relief, only paragraphs (1) and (2) seemed applicable. Sections 727(d)(1) and (2) state that a bankruptcy court shall revoke a chapter 7 discharge if:

(1) such discharge was obtained through the fraud of the debtor, and the requesting party did not know of such fraud until after the granting of such discharge;

(2) the debtor acquired property that is property of the estate, or became entitled to acquire property that would be property of the estate, and knowingly and fraudulently failed to report the acquisition of or entitlement to such property, or to deliver or surrender such property to the trustee;

Further, the BAP pointed out that § 727(e) provides the deadline before which a plaintiff must bring a Motion to Revoke. Paragraph (e)(1) provides that the revocation request must be brought within one year after discharge if under (d)(1). Paragraph (e)(2) says that if brought under (d)(2) or (d)(3), the Motion to Revoke must be brought before the latter of one year from discharge and the date the case is closed. 

Therefore, the section under which the revocation is sought is relevant, as it may change the date that the motion is time-barred. In this case, however, given the facts, the distinction was of no consequence.

Time-barred

Regardless of the paragraph(s) of § 727(d) under which the Motion to Revoke was brought, the BAP agreed that the Motion to Revoke was time-barred. The discharge was entered in 2010, and the case was last closed in 2012. Therefore, because the 2024 revocation effort was filed 12 years after the latter of the two, the one-year limit of § 727(e) applied as a bar.

The Appellant then argued that equitable tolling should apply, since he did not discover the Debtors’ alleged fraud (i.e., failing to disclose the 2005 property sale and $225,000 profit from same) until February 1, 2024. Appellant argued that one year from this date allowed him until February 1, 2025, to file the Motion to Revoke.

Statue of Limitations vs Statue of Repose

In response, the BAP noted that this argument was raised for the first time, on appeal, and did not need to be considered. The BAP then went into an analysis on the point, nonetheless, and discussed whether § 727(e) was a statute of limitation or a statute of repose. But first, a quick summary of the distinction:

“Both set time limits for bringing suits after a specific period. See Black’s Law Dictionary (10th ed. 2014) (defining “statute of limitations” as “a statute establishing a time limit for suing in a civil case, based on the date when the claim accrued,” and defining “statute of repose” as “[a] statute barring any suit that is brought after a specified time since the defendant acted”).”

Weil v. Elliott, 859 F.3d 812, 815 (9^th Cir, 2017) (concurrence). In sum, a statute of repose is strictly time-based, while a statute of limitations is based upon when the claim arose if it wasn’t obvious until later.  It is the latter “statute of limitations” interpretation of the one-year bar upon which Appellant was placing his hopes.

The BAP then observed that the Ninth Circuit Court of Appeals (“Ninth Circuit”) ruled that both § 727(e)(1) and (2) were “an ordinary, run-of-the-mill statute of limitations, specifying the time within which a particular type of action must be filed.” Weil at 814, reversing the BAP’s interpretation that it was a “statute of repose” at 529 B.R. 747, 754 (9^th Cir BAP, 2015) (reversed)

Equitable Tolling

Given that § 727(e) is a more lenient statute of limitation and not one of repose, the BAP then turned its analysis to whether it is subject to equitable tolling, with the observation that the Ninth Circuit in its prior ruling on the statute of limitations found that equitable tolling was not at issue. Weil, 859 F.3d at 817.

Looking to the Supreme Court, the BAP discerned the rule that “a litigant is entitled to equitable tolling of a statute of limitations only if the litigant establishes two elements: “(1) that he has been pursuing his rights diligently, and (2) that some extraordinary circumstance stood in his way and prevented timely filing.” Menominee Indian Tribe of Wisconsin v. United States, 577 US 250, 255 (2016), quoting Holland v. Florida, 560 US 631, 649 (2010).  Or put differently, “[e]quitable tolling is ‘applied in situations where, despite all due diligence, the party requesting equitable tolling is unable to obtain vital information bearing on the existence of the claim.’” Mejia-Hernandez v. Holder, 633 F. 3d 818, 824 (9th Cir, 2011).

With that standard to apply, the BAP then noted that Debtors’ SOFA was filed in October 2009 and Appellant learned of the bankruptcy when he got a copy of the discharge order in April 2010. Therefore, the alleged “fraud” of the Debtors’ for failure to disclose the sale and profits in their 2009 SOFA was discoverable by Appellant no later than April 2010. If he learned of it only in February 2024, this demonstrated a “clear lack of due diligence.” *8.  Further, Appellant failed to assert any extraordinary circumstance that caused his 14-year delay for the Motion to Revoke.

Going further, the BAP stated that even if one looked at the merits of the time-barred Motion to Revoke, Appellant did not establish how the non-disclosure of the sale and profits rose to the level required under § 727(d) because the SOFA does not even require the disclosure of a real estate sale that occurred over four years before filing the petition.

Author’s Commentary

Every attorney knows that deadlines matter. We have calendaring and reminder systems, often more than one.  One of the most crucial deadlines in the practice of bankruptcy law is one that can invalidate debtors’ discharge of all of their debt, assuming good cause. The bar is set fairly high to show that a debtor should lose a discharge, and rightly so.

One takeaway here is the reminder that § 727(e) is a statute of limitations and not a more strict statute of repose.  That is, the one-year rule is not fixed to the calendar, but allows for the possibility of equitable tolling. However, the bar for equitable tolling itself is high and requires vigorous due diligence and extraordinary circumstances.

Here, it seems the BAP bent over backwards to give Appellant his day, or rather, decade, in court. The Motion to Revoke was clearly filed long past the statutory requirements. The BAP followed every tributary of alternative circumstances to demonstrate that no matter how it was sliced, waiting 12 years, with these facts, to revoke the sacred discharge would just be a bridge too far.

Finality and closure are critical for debtors in bankruptcy.  Debtors seek, and usually deserve, a discharge of their debts for a “fresh start” and to move on with their lives, rebuilding their financial security. Certainly, a fresh start can be jeopardized and delayed if the debtor has unclean hands. But there is only so long a debtor should have to look back over their shoulder. At the end of the day, it’s a high bar to revoke a discharge, and absent extraordinary circumstances, waiting longer than a year – and especially fifteen years — should be, and was, barred.

These materials were written by Hale Andrew Antico, Chief Counsel of Antico Law Firm, representing consumer debtors in the Central District of California, and President of the Central District Consumer Bankruptcy Attorneys Association, with editorial contributions provided by Summer Shaw of Shaw & Hanover, PC and the Hon. (ret.) Meredith Jury.