Debtors Have to Show Up for 727 Trials: A Cautionary Tale

 A recent Fifth Circuit opinion brought back memories of a case I was involved with as a young lawyer. The lesson to be learned is that debtors are required to appear for a hearing on a complaint objecting to discharge regardless of whether they have been subpoenaed. Fed.R.Bankr.P. 4002(a)(2) requires a debtor to "attend the hearing on a complaint objecting to discharge and, if called, testify as a witness." In a recent Fifth Circuit opinion, Judge Edith Jones found that the debtor violated the rule but that it was harmless error. In a case I was involved with, the court was prepared to deny the discharge based on failure to appear.  The Fifth Circuit case is Black v. Triplett (In re Triplett), Case No. 25-40520 (5th Cir. 8/6/26), which can be found here. 

Better Late Than Never?

In the Fifth Circuit case, the court held a four day trial on an objection to discharge. The plaintiffs sought to call the debtor as a witness on the first day of trial but he was nowhere to be found. He made the decision not to appear because he had not been subpoenaed. However, he appeared later during  the trial and the creditors were able to ask all of their questions. The bankruptcy court found that the creditors had failed to carry their burden of proof and allowed the discharge. 

On appeal, the creditors argued that the debtor's failure to appear on the first day of trial was grounds to deny his discharge. The Fifth Circuit agreed that the debtor should have shown up. It said:

Triplett plainly violated Rule 4002 by failing to appear for the
first day of trial. Although Triplett contends that “a purely literal reading”
means that his eventual appearance at trial was enough, his absence still prevented him from “testify[ing] as a witness” when Black and Haltom
would have initially called him to the stand. That failure violates Rule 4002’s
plain language. Although the bankruptcy court blamed Black and Haltom for
failing to subpoena Triplett and found this failure “astonishing,” nowhere
does the language of the rule require a party to subpoena the debtor or a court
to compel the debtor’s attendance by court order. This rule’s silence on this
point becomes more telling because the immediately preceding provision
states that a debtor must attend “an examination when the court orders.”
Fed. R. Bankr. P. 4002(a)(1) (emphasis added). Based on the text and
context of Rule 4002, Triplett had to attend the trial, regardless of whether a
subpoena was issued.

Opinion, pp. 8-9. However, the court went on to find that "it is equally plain that, despite Triplett’s violation, any resulting
error was harmless." The court found that violation of Rule 4002 was not equivalent to failure to obey a court order which is grounds for denial of discharge under 11 U.S.C. Sec. 727(a)(6)(A). Because the creditors were able to eventually ask the debtor all the questions they wanted, his initial failure to appear was harmless error under Fed.R.Bankr.P. 9005. 

Larry Kelly Turns Red

This case brought to mind a case I was involved in as a young lawyer when I worked for Adrian Overstreet. We represented a lawyer who had been a partner in a prominent law firm. On December 15, shortly before filing bankruptcy, he resigned as a partner and was repaid his capital which he used to pay taxes. Because he was not a partner on December 31, he was not entitled to a partner's year-end distribution. However, the firm paid him a bonus anyway since they wanted to keep him happy. Because the bonus was post-petition income, it was not property of the estate. A creditor objected to discharge alleging that the debtor's resignation was a scheme to transfer property with intent to hinder, delay or defraud creditors.

On the day of trial, Mr. Overstreet and I showed up in Judge Larry Kelly's courtroom in the old federal courthouse on Eighth Street. The bank called the debtor as a witness but he was nowhere to be found. Mr. Overstreet  smiled and asked "Did you subpoena him?" At that point, Judge Kelly's face turned red. Anyone who appeared before the late Judge Kelly knew to watch out when that happened. He said something to the effect of "When I was in practice I used to play the game of hiding the witness in the courthouse. However, you forgot about rule 4002 which says the debtor shall appear at a hearing on his discharge." (This was 40 years ago so I may not remember what he said exactly but you get the gist). Judge Kelly gave us thirty minutes to produce our client on penalty of denial of the discharge. Because we had, as Judge Kelly guessed, stashed away our client elsewhere in the courthouse, we were able to produce him. After listening to the testimony, Judge Kelly denied the complaint and granted the discharge. 

Lessons Learned

The discharge is a privilege. Debtors earn the discharge by complying with the law and the rules. One of those rules says you shall attend a trial on an objection to your discharge. Note that this would not apply to a complaint to determine dischargeability under Sec. 523. In our case, Judge Kelly ordered the debtor to appear. If he had not appeared, the discharge could have been denied under Sec. 727(a)(6) because at that point there was a lawful order to appear. If faced with a similar situation, the creditor should ask the court to order the debtor to appear as required by the rule. If you represent the debtor, it is not a good idea to hide your client. It is also important to remember Rule 9005 when defending an appeal in a bankruptcy case.

On a personal note, one of the benefits of getting older is the ability to engage in a bit of nostalgia.