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Max Christian Kant & Ann Marie Kant, Ch. 7, BK20-40616-BSK (Nov. 28, 2022)

A creditor’s pre-petition state court action to rescind a warranty deed and to quiet title to real estate as against the debtors was pending when the Chapter 7 bankruptcy case was filed. The creditor filed a proof of claim, but did not object to dischargeability or discharge. The parties stipulated that the creditor’s claim would be estimated at zero for purposes of distribution to unsecured creditors, and the bankruptcy court ordered that the trustee should not pay that creditor’s claim.

Post-discharge, the creditor obtained relief from the automatic stay to pursue an in rem claim against the real estate. He amended his state court claim to, inter alia, remove his request for money damages. The debtors moved to dismiss the state court action on the grounds that the creditor’s claims had been discharged.

The injunction in the discharge statute plainly applies to in personam actions, but not to in rem actions. Under Nebraska statute, a quiet title action is in rem and unaffected by the discharge injunction. However, the creditor’s complaint sought to do more than quiet title. He also asked to rescind a valid deed, which is generally in personam. The fact that the creditor is not seeking the remedy of money damages does not convert his in personam action into an action in rem because the court could potentially award damages in the state court lawsuit. Accordingly, the creditor’s action is barred by the discharge injunction.

Monday, November 28, 2022
Judge Brian S. Kruse