In re Kleibrink

The 5th U.S. Circuit Court of Appeals concluded that the notice given to the creditor here did not satisfy the due process standard for notice set forth in the 1950 U.S. Supreme Court case Mullane v. Cent. Hanover Bank & Trust Co. Accordingly, the 5th Circuit affirmed the district court's judgment that the creditor's lien survived the earlier bankruptcy proceeding. 5th U.S. Circuit Court of Appeals, No. 07-11190, 09-21-2010

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Published opinion

Before DAVIS, STEWART, and DENNIS, Circuit Judges.

In this bankruptcy appeal, debtor Ricky Kleibrink challenges the district court’s affirmance of the bankruptcy court’s ruling that creditor Mid State Trust VII holds an enforceable security interest in a property of his, despite his having received a discharge in an earlier bankruptcy proceeding. The debtor filed the instant bankruptcy proceeding in order to avoid the creditor’s attempt to foreclose on the property. The bankruptcy court ruled that the earlier bankruptcy proceeding did not extinguish the creditor’s lien against the property, because the claim objection filed by the debtor in the earlier proceeding did not afford the creditor due process in two ways. First, the claim objection was not accompanied by clear notice that the debtor was challenging the validity, priority, or extent of the lien, and that the debtor sought to abrogate the creditor’s right to look to its collateral. Second, the debtor did not comply with the procedural safeguards set forth in Part VII of the Federal Rules of Bankruptcy Procedure. Accordingly, the bankruptcy court concluded that the claim objection filed by the debtor could not substitute for the adversary proceeding that is ordinarily required by the bankruptcy rules for extinguishing a lien under the circumstances of the case. The debtor appealed to the district court, which affirmed for substantially the same reasons.

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