Revocation of Bankruptcy Discharge Statute of Limitations Is Not Jurisdictional

In Weil v. Elliott, decided June 14, 2017, the Ninth Circuit Court of Appeals decided the statute of limitations for the filing of an action to revoke a debtor's discharge is not jurisdictional and can be waived if not timely raised as an affirmative defense.

The debtor failed to list a material asset in his bankruptcy, namely his home. When the trustee discovered this, she filed a complaint to revoke the debtor's discharge under Section 727(d), but admittedly, it was late pursuant to the statute of limitations deadline set forth in Section 727(e). The trustee prevailed in bankruptcy court on summary judgment but on appeal, the Bankruptcy Appellate Panel ("BAP") remanded to the bankruptcy court with instructions to vacate the judgment for lack of jurisdiction because the complaint was untimely, even though the debtor never raised the issue. The BAP raised the issue sua sponte and found that the bankruptcy court lacked subject matter jurisdiction and thus, debtor's failure to raise the statute of limitations issue did not matter. The Ninth Circuit reversed and remanded, finding that the statute of limitations found in Section 727(e) is not jurisdictional and as such, is an affirmative defense which can be forfeited if not raised timely. Because the debtor failed to raise the statute of limitations issue, the Ninth Circuit considered the underlying complaint. The Ninth Circuit ultimately held that the debtor fraudulently concealed his home and revoked his discharge under Bankruptcy Code Section 727(d)(1).

Of note, the Court left open whether Section 727(e) is subject to equitable tolling.

The full opinion is attached here. If you have any questions, please contact Melissa Lowe or any of the attorneys at Shulman Bastian Friedman & Bui LLP at 949-340-3400.

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