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86ing a 2004 With 69

Thumbnail image for 86ing a 2004 with 69 dplic 74103135.jpg

Federal Rule of Bankruptcy Procedure 2004 is one of the most powerful discovery tools around. A legitimate fishing expedition.[2] However, it has limits.[3]

Imagine a Chapter 7 Trustee has a money judgment against the debtor in a bankruptcy case. The Trustee seeks Fed. R. Bankr. P. 2004 discovery from the debtor to enforce that money judgment. Should it fly? 

Fed. R. Bankr. P. 7069 incorporates Federal Rule of Civil Procedure 69 ("Rule 69")[4] into bankruptcy cases. Rule 69 is the designated vehicle for conducted discovery to enforce judgments.[5] Fed. R. Bankr. P. 2004 is not appropriate.[6]

Why should you care?

Money judgments against a debtor show no love for that debtor from the Trustee or court. Fed. R. Bankr P. 2004 examinations give the Trustee an opportunity to object to that debtor's discharge. Fed. R. Bankr. P. 2004 examinations are pursuant to order.[7] Failure to comply with that order invites objections to the debtor's discharge under Bankruptcy Code § 727.[8]

Rule 69 applies state procedures to enforce money judgments (see note 4). Generally, state enforcement methods don't require orders directing discovery, absent a judgment debtor's non-compliance with usual procedures. Therefore, orders jeopardizing discharge could not be entered until later in the enforcement proceeding.

One expects judgment debtors' compliance with discovery, without orders. Non-compliance happens for many reasons. Avoiding a drastic consequence for non-compliance, from the get-go, seems wise. Plus, it's realistic.

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[1] © 2019 Wayne Greenwald

[2] In re Drexel Burnham Lambert Grp., Inc., 123 B.R. 702, 711 (Bankr. S.D.N.Y. 1991)

[3] Id., Martin v. Schaap Moving Sys., Inc., 152 F.3d 919, *3 (2d Cir. 1998), In re Kearney, 590 B.R. 913, 922 (Bankr. D.N.M. 2018)

[4] Fed. R. Bankr. P. 7069 say, "69 F. R. Civ. P. applies in adversary proceedings."

[5] In General.

(a.) Money Judgment; Applicable Procedure. A money judgment is enforced by a writ of execution unless the court directs otherwise. The procedure on execution-and in proceedings supplementary to and in aid of judgment or execution-must accord with the procedure of the state where the court is located, but a federal statute governs to the extent it applies.

(b.) Obtaining Discovery. In aid of the judgment or execution, the judgment creditor or a successor in interest whose interest appears of record may obtain discovery from any person-including the judgment debtor as provided in these rules or by the procedure of the state where the court is located.

[6] In re Barnes, 365 B.R. 1, 6 (Bankr. D.D.C. 2007)("Specifically, Rule 69 of the Federal Rules of Civil Procedure. . ., contemplates that discovery in an adversary proceeding to enforce a judgment shall be conducted under that rule, not Rule 2004."), In re Gen. Search.com, 322 B.R. 836, 841 (Bankr. N.D. Ill. 2005)

[7] See, Fed. R. Bankr. P. 2004 (a), "Examination on motion of any party in interest, the court may order the examination of any entity."

[8] See, In re Eckert, 375 B.R. 474, 481 (Bankr. N.D. Ill. 2007), aff'd sub nom. Eckert v. Grochocinski, No. 07 C 6012, 2008 WL 4547224 (N.D. Ill. Apr. 2, 2008)(Failure to testify in violation of an order directing examination resulted in revoking discharge). Concannon v. Costantini (In re Costantini), 201 B.R. 312, 316 (Bankr. M.D. Fla. 1996). 

Wayne M. Greenwald

Wayne M. Greenwald
Phone: 212-983-1922 & 888-496-1553 (Toll Free)
Fax: 212-983-1965
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