In re: Aeschbacher, No. 09-40713-JDP (Bankr. D. Idaho, February 15, 2011).
In this case, the court considered the issue of what happens when a debtor attempts to hide an asset from the court and then fails to respond to court proceedings in a timely manner.
When the debtor, Valerie Aeschbacher, filed a Chapter 7 petition, she claimed that she was driving a 2004 Ford Escape, but that her mother owned it and she was holding it for her. When the bankruptcy trustee underwent a title search on the vehicle, he found that the debtor held title, not her mother. In an attempt to recover the vehicle, the trustee commenced an adversary proceeding against the debtor, who did not respond, and against whom the court entered a default judgment (a judgment against the debtor because the debtor never appeared to defend her case).
The debtor responded by saying she was in fact the co-owner of the vehicle, and that the vehicle was exempt under her estate. The trustee objected to this exemption, and the debtor and her attorney failed to respond to the objection within a reasonable time, prompting the court to enter an order rejecting her exemption. The trustee was forced to file multiple adversary proceedings in order to obtain possession of the vehicle. Eventually, unable to obtain possession, the trustee sought the court's revocation of the debtor's discharge.
The debtor sought to have the default judgment set aside by the court, but the court denied the request. In deciding whether to overturn a final judgment, the court held that, under Civil Rule 60(b), it could do so if there was mistake, inadvertence, surprise, or excusable neglect. The debtor holds the burden of establishing the existence of one of these grounds for relief. Where, as here, the debtor argues there was excusable neglect, the court looked to the factors in Pioneer Inv. Servs. Co. v. Brunswich Assoc. Ltd. P'ship, focusing on (1) the danger of prejudice to the debtor, (2) the length of delay and its potential impact on judicial proceedings, (3) the reason for the delay, and (4) whether the movant acted in good faith. The court reasoned that the debtor delayed the proceedings unreasonably, without explanation, and did not act in good faith, and that, therefore, the factors weighed heavily against her.
