Creditor’s Complaint in Debtor’s Case Filed Two Minutes Too Late

Understand the complexities and nuances of the Bankruptcy Code to better advise clients and prepare for court.

By Diane Davis

A couple who hired a home-improvement business that later filed for bankruptcy didn’t file a timely claim against it after the work was found to be deficient, the U.S. Bankruptcy Court for the District of New Jersey held ( Canonico v. Canonico , 2017 BL 206543, Bankr. D.N.J., No. 17-01211, 6/16/17 ).

Federal Rule of Bankruptcy Procedure 4007(c) requires a complaint on whether a debt should be wiped out in bankruptcy to be filed within 60 days after the meeting of creditors.

Iris and Andrew Holzberg filed their complaint using the bankruptcy court’s electronic filing system two minutes too late. As a result, their case against the debtors should be dismissed, Judge Michael B. Kaplan said June 16.

Anthony and Vikki Canonico’s company, US Irrigation LLC and VH Canonico Enterprises Inc., performed more than $226,243 of work on the Holzberg’s house. Later, the Holzbergs discovered many defects in their work. They also learned that the Canonicos weren’t licensed and didn’t have any general liability insurance.

After the Holzbergs sued them in state court, the Canonicos filed Chapter 7 bankruptcy to liquidate their company. They listed the Holzbergs’ claim as unsecured and a nonpriority.

The Holzbergs’ attorney said the tardy claim was due to a technical issue with the court’s electronic filing system. A case management supervisor with the court also noted in the docket that it had been filed on time, their attorney said.

The Canonicos argued in favor of strict enforcement of the filing deadline.

After looking at similar cases, the court found that the Holzbergs weren’t prevented from filing a timely complaint by anything other than counsel’s “own failure to allow more than three minutes to file a complaint” even though he knew about the 60-day deadline.

The Holzbergs’ attorney couldn’t show that the court’s electronic system was slow or had any technical problems, the court said.

The court declined to extend the doctrine of “equitable tolling” to this case because it should be used sparingly and the Holzbergs’ counsel wasn’t “diligent” in preserving their claim.

Equitable tolling says that a specific time limitation won’t apply to bar a claim in extraordinary circumstances beyond a creditor’s control and if there are extenuating circumstances other than attorney error, the court said, citing some of the reasons where it has been exercised.

Michael Makarov, Fair Lawn, N.J., represented the Holzbergs; Darren M. Baldo, Princeton Jct., N.J., represented the Canonicos.

To contact the reporter on this story: Diane Davis in Washington at DDavis@bna.com

To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Try Bankruptcy on Bloomberg Law