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Rule 1009: Does a Debtor Have an Absolute Right to Amend Their Exemptions in a Reopened Case?

This article originally ran in the California Bankruptcy Journal, Vol. 35 Cal. Bankr. J. No. 4 (2021).

By Larry D. Simons[1]

  1. Introduction.

Rule 1009(a) of the Federal Rules of Bankruptcy Procedure (“FRBP”) states in part, “A voluntary petition, list, schedule, or statement may be amended by the debtor as a matter of course at any time before the case is closed. The debtor shall give notice of the amendment to the trustee and to any entity affected thereby.” (hereafter, the “Rule”).  Although the Rule’s meaning appears to be unambiguous, courts have been divided in interpreting the application of this Rule in cases that have been reopened.   In consumer chapter 7 matters, there are several reasons that a case may be reopened by the debtor.  Two common instances when cases are reopened are: (1) the debtor discovers post closure that a judgment lien has been placed on her real property and she seeks to avoid that lien, or (2) debtor forgets to schedule and exempt an asset, such as a class action settlement.   In both of these instances, debtor must amend her schedules, including her schedule C,[2] to accomplish the underlying reason behind reopening her case.

In the first instance, if the debtor has not claimed an exemption in the real property, she cannot avoid a judgment lien on her real property due to the requirement that there must be an exemption that is impaired.  11 U.S.C. § 522(f) requires that an exemption be impaired by a judicial lien in order to avoid that lien.[3]  In the second instance, if the debtor had disclosed and claimed an exemption in the asset, then the asset would have been abandoned back to her upon closure of the case if it was not administered by the trustee.[4]

On its face, Rule 1009(a) appears to allow a debtor to freely amend schedules at any time until a case is closed.  Upon closure, that right appears to be cutoff.  The United States Supreme Court has stated that when courts are interpreting statutes and rules, they are to be given their “plain meaning.”[5]  “When the words of a statute are unambiguous, then, this first canon is also the last: ‘judicial inquiry is complete.’”[6]

However, different courts have interpreted the Rule more broadly than its apparent plain meaning and allowed a debtor to amend schedule(s), including schedule C, after a case is closed, despite the negative implications it may have on the estate and creditors.

  1. Different Interpretations of the Rule.

Courts are split on how to apply Rule 1009(a) to cases that were closed and then subsequently reopened.   Three different approaches have been promulgated regarding the application of the Rule.   These three approaches focus on the different interpretations of the phrase “at any time before the case is closed” as found in the Rule.[7]

First, the “broad approach” treats a reopened case the same as a case that was never closed and allows the debtor to amend schedules as a matter of course in the reopened case.  Second, the “middle approach” allows a debtor to amend schedules upon proving the failure to do so before the case closes was the result of “excusable neglect” as defined in FRBP 9006(b)(1).  Third, the “narrow approach” does not permit any amendments to schedules in a reopened case.[8]

  1. The Broad Approach

The broad approach treats a reopened case the same as a case that was never closed and allows the debtor to amend schedules as a matter of course in the reopened case.[9] 

In Goswami, debtors filed a chapter 7 bankruptcy and listed real property located at 3221 East Harvard Avenue, Fresno in their schedules.  They listed the value of the property at $60,000.00 and the outstanding balance of the consensual trust deeds at $70,000.00.  No exemption was claimed in the property.[10]    Approximately five (5) years after debtors received their discharge, they discovered a judicial lien recorded against their property.  They moved to reopen their case and after the case was reopened, they filed an amended Schedule C where they claimed an exemption in the property for the first time.[11]

Debtors filed a motion to avoid the judgment lien.  No party objected to the lien avoidance motion; however, the court denied the motion stating that “a debtor is not entitled to exempt a scheduled asset after the case is closed for purposes of exercising the remedies available under § 522(f).  Debtors timely appealed.[12]

The Bankruptcy Appellate Panel (“BAP”) stated that the bankruptcy court’s ruling relied on two erroneous legal premises.  “First is the premise that a debtor’s ability to amend his or her exemption schedule for the purpose of avoiding a lien under § 522(f) terminates once a case is closed, regardless of whether the case is later reopened. Second is the premise that there is a difference between a never-closed case and a reopened case with respect to amended exemption claims.”[13]

The BAP stated that the relevant date to determine exemptions is the petition date as is a debtor’s lien avoidance rights under § 522(f).  Therefore, the bankruptcy court’s focus on the closure of the case was “misplaced.”  It further stated that the consequences of closing a case “are limited” and that lien avoidance actions are not barred by either entry of a discharge or closure of the bankruptcy case.[14]

With regards to the second premise relied upon by the bankruptcy court, the BAP stated that “[F]or the purposes of filing amendments, there is no difference between an open case and a reopened case,…”[15]   The bankruptcy court cited to Collier on Bankruptcy in support for the middle approach, but the BAP declined to adopt that approach.   The BAP, in adopting its position, stated that its approach supported the “Ninth Circuit’s policy of liberally allowing debtors to amend their exemption schedules so as to enhance their fresh start.”[16]  Other courts that follow Goswami have stated that Rule 9006 of the FRBP does not apply to Rule 1009 and decline to follow the middle approach because such an approach shifts the burden of proving an exemption to the debtor, which contradicts the burden of proof set forth in FRBP Rule 4003(c).[17]

  1. The Middle Approach.

The middle approach applies Rule 9006(b)(1), which allows the debtor to amend schedules upon proving the failure to do so before the closure of the case was as a result of “excusable neglect.”[18]  These courts found that the Rule’s “any time before the case is closed” language creates a “specified period” during which an act must be done.  Therefore, the debtor must show the failure to act was the result of excusable neglect.[19]

In the case of In re Poulette,[20] debtor filed a chapter 7 case without representation.  Based upon her independent research, she believed that because her interest in a survivor’s medical malpractice claim resulting from the death of debtor’s mother would be fully exempt, she need not disclose this asset.[21]  She further testified that a bankruptcy attorney she consulted with told her that her potential claim against a contractor was not viable.[22]  Relying on that advice, she did not list her claim against the contractor in her schedules.  Debtor testified that she told the chapter 7 trustee about her claim against the contractor and the trustee did not dispute that she was informed of this claim.[23]   Debtor did not disclose the existence of the medical malpractice claim at her meeting of creditors.[24]   Debtor received her discharge and the case was closed.  Approximately six months later, the trustee filed a motion to reopen the case as the claim against the contractor had been liquidated in the amount of $80,000.[25]   The Court reopened the case and trustee filed a notice of assets and sought to employ professionals.  After the case was reopened, debtor filed amended schedules, in which she listed the medical malpractice claim for the first time and sought to exempt a portion of the contractor claim and the entire medical malpractice claim.[26]  The chapter 7 trustee objected to debtor’s attempt to claim the assets as exempt.[27]

As a starting point, the bankruptcy court found that Rule 1009(a)’s plain language “terminates a debtor’s liberal right to amend exemptions once the case is closed.”[28]   The court found that the mechanism that a debtor should rely upon when seeking to amend her schedules post-closing is Rule 9006(b) (1).  This Rule states in part, “when an act is required or allowed to be done at or within a specified period of time by these rules, the time may still be enlarged after it has expired, where the failure to act was the result of excusable neglect.”[29]   The United States Supreme Court determined the applicable factors to be considered by a court when deciding whether or not the “excusable neglect” standard should apply.[30]  These factors include, “the danger or prejudice to the opposing party, the length of the delay and its potential impact on judicial proceedings, the reason for the delay, including whether it was within the reasonable control of the movant, and whether the movant acted in good faith.”[31]

Applying these factors, the bankruptcy court determined that debtor’s failure to list the malpractice claim and exempt both the malpractice claim and the contractor claim constituted excusable neglect and therefore, debtor should be able to amend her schedules after the closure (and subsequent reopening) of the case.[32]

Other courts applying this standard have found that Rule 1009 is not an absolute bar to amendments after closure of the case.  Rather, Rule 9006 permits courts to enlarge the time for taking certain actions upon a showing of good cause and excusable neglect.[33]  Nevertheless, the debtor bears the burden to establish excusable neglect and thus the right to amend the schedules.[34]

  1. The Narrow Approach.

The narrow approach does not permit any amendments to schedules in a reopened case.[35]  In Barlett, debtors’ home was destroyed by fire and was uninsured.  At the time they filed for bankruptcy, the value of their home (now a vacant lot) was less than the outstanding mortgage.  There was also a judicial lien recorded against the property.  As such, they did not claim any exemption in the home.  During the course of their bankruptcy, debtors did not seek to avoid the judicial lien and the case closed.[36]

After closure of the case, debtors sought to reopen their case to amend their papers and avoid the judicial lien.  The court, sua sponte, questioned whether it was proper for debtors to reopen their case to amend their claimed exemptions.[37]

The court held that reopening a case under § 350 is “supposed to be little more than an administrative function which is designed to resurrect closed files from the court’s archives so that some type of request for relief can be received and acted upon.”[38]  It further stated that § 350 was not “designed as an opportunity to create, and then enforce, rights that did not exist at the time the case was originally closed.[39]

In reaching this holding, the court examined Rule 1009 and relied on the language in the Rule that stated amendments may be filed at any time before the case is closed.   The court advised debtors’ counsel that it could not ignore the word “before” in the Rule and stated that the word created a limiting effect as to when schedules may be amended.  It disagreed with the ruling in Goswami and stated that adopting the broad approach would render the Rule’s limitation completely illusory and meaningless.[40]

In addition to its narrow interpretation of the Rule, the Court denied debtors motion on an additional ground.  Once the case was closed, the property was abandoned back to the debtors pursuant to § 554(c).  At that time, it was no longer property of the estate.  The Court found that the Code allowed debtors to claim exemptions in estate property.  Once the property was abandoned back to the debtors, there was no purpose to give debtors an opportunity to claim exemptions in property in which the Estate had no interest.[41]

The Court stated that cases could be reopened to add creditors as no substantive rights were being created.  In a footnote, the Court cited to a case that precluded a debtor from reopening to amend schedules in order to include an undisclosed personal injury claim in order to avoid the consequences of not scheduling the asset.[42]

III.      Does Law v. Siegel Impact the Different Approaches?

In Law v. Siegel,[43] the Supreme Court disallowed a bankruptcy trustee to surcharge a debtor’s exemption based upon the debtor’s egregious conduct.  It found that debtors have a broad entitlement to the benefit of a statutorily allowed exemption, without regard to the good faith of the debtor or prejudicial impact on the bankruptcy estate, stating:

[The trustee] points out that a handful of courts have claimed authority to disallow an exemption (or to bar a debtor from amending his schedules to claim an exemption, which is much the same thing) based on the debtor’s fraudulent concealment of the asset alleged to be exempt. He suggests that those decisions reflect a general, equitable power in bankruptcy courts to deny exemptions based on a debtor’s bad-faith conduct. For the reasons given, the Bankruptcy Code admits no such power.”[44]

The Court in the case of In re Benjamin,[45] discussed the applicability of Law to the three interpretations of Rule 1009.  The Court believed that it had to reconcile Rules 1009 and 9006(b)(1) with Law.[46]  It reviewed the three approaches and found that the middle approach was the best approach.[47]   The Benjamin court found that Law did not address the meaning of the phrase “at any time before the case is closed” in Rule 1009 and the application of Rule 9006 in reopened cases.[48]

The Benjamin court found that other courts which had adopted the broad approach and treated reopened cases as if they were never closed rendered the phrase “at any time before the case is closed” in Rule 1009 a nullity.  Statutory interpretation requires that every word in a statute be accorded meaning.[49]  Prior to Law, these courts believed that they could utilize their equitable powers to curb abusive practices, such as bad faith or prejudicial amendments.[50]  However, to the extent such decisions relied on the use of equitable powers to disallow an amendment based upon a debtor’s conduct, Law precluded their ability to do so.[51]

The Benjamin court then acknowledged that the narrow approach gives heed to these admonitions when adopting statutory construction and agreed that the narrow approach is the correct interpretation.  However, the court found that the narrow approach failed to address the possible impact of Rule 9006.[52]  That rule allows a bankruptcy court to consider motions to expand certain time periods even after the specified period has expired.  In a case that has been reopened, the specified time period to amend the schedules has expired by Rule 1009’s language.  However, the Benjamin court found that the time period in Rule 1009 should be treated like other time periods in the Code and Rules.  Rule 9006(b) (2) lists those rules for which the enlargement of time is not permitted and Rule 1009 is not one of them.[53]  This approach allows a debtor to amend schedules without leave of the court in an open case, but in a reopened case, a debtor must file a motion to enlarge the time to amend and in the motion, meet the excusable neglect standard found in Pioneer.[54]

The Benjamin court found that the middle approach did not run afoul of the dicta quoted herein from Law as any objection would be for failure to comply with Rule 9006, not relying on a bankruptcy court’s equitable powers.[55]

  1. Conclusion

This author believes that because there are three different interpretations of Rule 1009, it is imperative that either the Supreme Court grant certiorari to resolve this split of authority or that Congress revise Rule 1009 to eliminate any ambiguity.  In the interim, it appears to this author that the best interpretation to Rule 1009 is the middle approach, which requires a debtor to seek a hearing under Rule 9006 to enlarge the time to amend the schedules.  By requiring a hearing on any amendment, courts can determine whether the proposed amendment satisfies the excusable neglect standard, thus protecting the integrity of the system, yet affording the honest debtor their fresh start.  The other two approaches do not provide any balance between the competing parties and removes the opportunity for judicial intervention.


[1] Larry D. Simons is a Certified Specialist in Bankruptcy Law by the State Bar of California, Board of Legal Specialization since 2004.  He is the principal of the Law Offices of Larry D. Simons and a panel chapter 7 trustee for the Central District of California, Riverside Division.  The views expressed herein are solely the author’s and not reflective of any position of the Office of the United States Trustee.

[2] The official title of Schedule C is “Official Form 106C.  Schedule C: The Property You Claim as Exempt.”

[3] Culver, LLC v. Chiu (In re Chiu), 304 F.3d 905, 908 (9th Cir. 2002).

[4] See, 11 U.S.C. § 554(c). Citations are to Title 11, unless specified otherwise.

[5] United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 241, 103 L. Ed. 2d 290, 109 S. Ct. 1026 (1989) (“The basic direction from the United States Supreme Court is that Congress says in a statute what it means and means in a statute what it says.” In re Pangang Group Company LTD., 901 F.3d 1046, 1056 (2018)).

[6] Pangang, 901 F.3d at 1056.

[7] In re Benjamin, 580 B.R. 115, 118 (Bankr. N.J. 2018).

[8] In re Dollman, 583 BR 268, 271-272 (Bankr. D. N.M. 2017), reversed and remanded, 595 BR 849 (10th Cir. BAP 2019); In re McCowan, 2018 Bankr. LEXIS 2512, *7 (Bankr. E.D.N.C. 2018).

[9] In re Goswami, 304 BR 386, 392-3 (9th Cir. BAP 2003).

[10] Goswami, 304 BR at 389.

[11] Id.

[12] Id.

[13] Goswami, 304 BR at 391.

[14] Goswami, 304 BR at 392.

[15] Goswami, 304 BR at 393, citing, In re Boyd, 243 B.R. 756, 766 (N.D. Cal. 2000).

[16] Goswami, 304 BR at 394.

[17] In re Mendoza, 595 BR 849, 857 (10th Cir. BAP 2019).

[18] In re Moretti, 260 BR 602, 607-08 (1st Cir. BAP 2001).

[19] Mendoza, 595 BR at 855.

[20] 493 BR 729 (Bankr. D. Md. 2013).

[21] Poulette, 493 BR at 731-732.

[22] Id.

[23] Id. 493 BR at 732.

[24] Poulette, 493 BR at 732.

[25] Id.

[26] Id.

[27] Id.

[28] Id. 493 BR at 733, citing In re Wilmoth, 412 BR 791, 796 (Bankr. E.D. Va. 2009).

[29] Poulette, 493 BR at 733-734.

[30] Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380, 113 Sup.Ct. 1489, 123 L.Ed.2d 74 (1993).

[31] Pioneer, 507 U.S. at 388, 112 Sup. Ct. at 1489.

[32] Poulette, 493 BR at 734

[33] Ellman v. Baker (In re Baker), 514 BR 860, 865 (E.D. MI. 2014).

[34] 9 Collier on Bankruptcy, ¶ 1009.02 (16th ed. 2020); Benjamin, 580 BR 115.

[35] In re Barlett, 326 BR 436, 439 (Bankr. N.D. Ind. 2005).

[36] Barlett, 326 BR at 437-438.

[37] Barlett, 326 at 438.

[38] Barlett, 326 at 438, citing to In re Menk, 241 B.R. 896, 913 (9th Cir. BAP 1999).

[39] Barlett, 326 BR at 438.

[40] Barlett, 326 BR at 439.

[41] Barlett, 326 BR at 440-41.

[42] Barlett, 326 BR at 441, fn 3; In re Superior Crewboats, Inc., 374 F.3d 330 (5th Cir. 2004)

[43] 571 U.S. 415, 134 Sup Ct. 1188, 188 L. Ed. 2d 146 (2014)

[44] 571 U.S. at 423-424, 134 Sup Ct. at 1196-97.

[45] 580 BR 115 (Bankr. N.J. 2018).

[46] Benjamin, 580 BR at 117.

[47] Id., 580 at 118.

[48] Id., 580 at 118.

[49] Id.

[50] In re Awan, 2017 Bankr. LEXIS 3177 at *9 (Bankr. C.D. Ill. 2017) citing to Goswami.

[51] Id.

[52] Benjamin, 580 BR at 119.

[53] Benjamin, 580 BR at 119.

[54] Id.

[55] Awan, 2017 Bankr. LEXIS 3177, at *10.

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