Otha Marvin Delaney

U.S. BANKRUPTCY COURT
District of South Carolina
Case Number: 13-00446-jd
Amended Order Concerning First Financial of Charleston, Inc.'s Objection to Debtor's
Motion to Reopen
The relief set forth on the following pages, for a total of 17 pages including this page, is
hereby ORDERED.
FILED BY THE COURT
11/17/2025
US Bankruptcy Judge
District of South Carolina
Entered: 11/17/2025
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UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF SOUTH CAROLINA
IN RE:
Otha Marvin Delaney,
Debtor(s).
C/A No. 13-00446
Chapter 7
AMENDED ORDER1
CONCERNING FIRST
FINANCIAL OF CHARLESTON,
INC.’S OBJECTION TO
DEBTOR’S MOTION TO REOPEN
THIS MATTER is before the Court on the Objection2 by First Financial of
Charleston, Inc. (“First Financial”) to a Motion to Reopen3 filed by Otha Marvin
Delaney (“Debtor”). Debtor and First Financial have been engaged in a civil action
for the past fourteen years (the “State Court Litigation”)4. That litigation is now at
the summary judgment stage,5 where First Financial argues that Debtor should be
barred from maintaining the State Court Litigation based on his failure of
disclosure in this case. Debtor seeks to reopen this twelve-year-old bankruptcy case
to list the cause of action against First Financial as an asset of this estate.
As a threshold matter, Debtor raised whether First Financial has a right to
be heard on the Motion to Reopen and standing to object. Both parties filed
statements of dispute on July 14, 2025.6 In his statement, Debtor objected to any
1 This order amends the order entered August 12, 2025. The motion of Otha Marvin Delaney to alter
or amend that order is granted in part. The Court amends page 10 of this order pursuant to Fed. R.
Bankr. P. 9023.
2 ECF No. 22.
3 ECF No. 19.
4 Otha Delaney v. First Financial of Charleston Inc., Case No. 2011-CP-10-07166 (S.C. Ct. Com. Pl.,
Charleston Cnty., filed Oct. 4, 2011)
5 ECF No. 22, p. 8, ¶ 47.
6 ECF Nos. 28 and 29.
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witness testimony or evidentiary hearing until this issue was determined. The
Court held a hearing on standing on July 16, 2025. The parties agreed that an
evidentiary hearing on this issue was unnecessary as the matter was purely a
question of law.7 At the conclusion of the hearing, the Court orally ruled that First
Financial had standing to object to the Motion to Reopen and continued the hearing
on the merits of Debtor’s Motion to Reopen until September 9, 2025.
FACTS AND PROCEDURAL BACKGROUND
On October 4, 2011, Debtor filed a class action in the Charleston County
Court of Common Pleas against First Financial, alleging that First Financial
violated the South Carolina Commercial Code related to its collection efforts against
Debtor and other putative class members. Debtor is the lead plaintiff of the class.
The State Court Litigation is not yet resolved. The nearly fourteen-year procedural
history of the State Court Litigation is complex, but the facts relevant to this matter
are simple.
The parties agree that Debtor entered into a retail installment sales contract
to purchase a vehicle in October of 2007. First Financial was the secured party to
that contract. Debtor defaulted on the loan contract. In the spring of 2008, First
Financial repossessed the vehicle. Debtor’s state court complaint alleges that
Debtor, and others similarly situated, were not provided proper notice of disposition
under the UCC when their collateral was sold.
7 First Financial argues that it also purchased another creditor’s claim, to solidify its own standing to
object, and attempted to enter the assignment agreement at the hearing. Debtor objected to the
evidence of assignment being introduced. The objection was sustained for lack of foundation. See
Transcript of Hearing Held on July 16, 2025, at 59: 25–61:3, In re Delaney, C/A No. 13-00446-JD
(Bankr. D.S.C. January 24, 2013), ECF No. 41.
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On January 24, 2013, Debtor filed this Chapter 7 bankruptcy case. First
Financial was not scheduled as a creditor and the State Court Litigation was listed
as “dismissed” in the Statement of Financial Affairs.8 Debtor did not schedule the
State Court Litigation as an asset in Schedule B nor did he exempt any recovery
from the action in Schedule C. First Financial asserts that the State Court
Litigation was, in fact, not dismissed at the time of the petition or at the time the
chapter 7 trustee filed his report of no assets.9
Debtor now asks the Court to reopen the 2013 bankruptcy case, for the
purpose of amending schedules to “list and describe the [l]awsuit in a more fulsome
manner.”10 First Financial opposes the relief because its recent motion for summary
judgment in the State Court Litigation is pending before the trial court and
reopening this case may impact that proceeding.
ANALYSIS AND CONCLUSIONS OF LAW
Chapter 7 debtors must file schedules that list and describe all of their
assets, including legal claims against others. 11 U.S.C. § 521(a)(1)(B)(i). When a
chapter 7 case is closed, assets that the debtor scheduled but the trustee did not
administer are automatically “abandoned,” meaning they revert to the debtor's
ownership. 11 U.S.C. § 554(c). But any assets that the debtor failed to schedule are
not abandoned and instead remain property of the estate. 11 U.S.C. § 554(d). Debtor
8 See ECF No. 1.
9 From the state court’s records, it appears the State Court Litigation was dismissed prior to Debtor’s
discharge by the trial judge. On appeal, the trial court’s order granting dismissal was reversed and
the State Court Litigation has continued. See Delaney v. First Fin. of Charleston, Inc., 418 S.C. 209,
211, 791 S.E.2d 546, 547 (Ct. App. 2016), rev'd, 426 S.C. 607, 829 S.E.2d 249 (2019).
10 ECF No. 19, p. 2, ¶ 9.
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now seeks to correct a misstep in his original filing to disclose the State Court
Litigation as an asset that may either be administered by a trustee or abandoned to
him.
There are two threshold issues the Court must determine prior to hearing the
merits of Debtor’s Motion to Reopen. First, whether First Financial has a statutory
right to be heard on its objection. Second, if it does have a right to be heard,
whether that right is constrained by traditional Article III standing requirements.
Debtor contends11 First Financial lacks both the right to be heard under the
Bankruptcy Code and standing under Article III of the United States Constitution
to object to his Motion to Reopen because First Financial’s only demonstrated
interest in this matter is the potential effect that reopening the case might have on
the State Court Litigation.12 This Court has previously found that a defendant to a
state court action lacks standing to oppose reopening. In re Boyd, 618 B.R. 133, 160
(Bankr. D.S.C. 2020). However, the facts of Boyd were very different from the facts
of this case. In Boyd, a debtor sought to reopen a chapter 13 case to disclose a post-
petition cause of action and the party opposing reopening had no stake in the
outcome of the bankruptcy case. In this case, the State Court Litigation was
initiated pre-petition and remains pending against First Financial in its capacity as
a former secured creditor of property pledged by Debtor. Debtor nevertheless avers
First Financial is not presently a creditor. Debtor alleges that First Financial has
11 See ECF No. 26 (“Debtor’s Response to First Financial’s Objection”), pp. 5–6.
12 See Debtor’s Response to First Financial’s Objection, p. 4.
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not provided any evidence of its secured, unfulfilled lien against Debtor,13 of its
acquisition of another creditor’s claim,14 or of any pecuniary interest that would be
directly affected by the reopening of this case. Debtor also contends that the statute
of limitations has barred First Financial from seeking any additional recovery from
Debtor under the 2007 contract.
First Financial disagrees, contending it has both a statutory right to be heard
as a “party in interest” and, to the extent it is required, Article III standing to
object. On both of these issues, the Court agrees with First Financial.
I. Right to be Heard as a Party in Interest
“A case may be reopened in the court in which such case was closed to
administer assets, to accord relief to the debtor, or for other cause.” 11 U.S.C
§ 350(b). Fed. R. Bankr. P. 5010 allows a case to be reopened “on motion of the
debtor or a party in interest pursuant to § 350(b) …” Fed. R. Bankr. P. 5010
(emphasis added). However, the right to oppose a motion to reopen is not
specifically addressed in the Bankruptcy Code or Rules. Courts considering the
issue focus on whether the objecting party is a “party in interest.” See In re Malin,
652 B.R. 828, 831-32 (Bankr. N.D. Ga. 2023). This Court agrees. If a party in
interest has a right to raise an issue, it follows that the party in interest has the
right to be heard when the issue is raised by another, and their rights would be
impacted by the outcome.
“Party in interest” is not defined in the Bankruptcy Code, but the Fourth
13 See Debtor’s Response to First Financial’s Objection, pp. 3–4.
14 See Debtor’s Response to First Financial’s Objection, pp. 6–7.
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Circuit has indicated that a “party in interest” for bankruptcy purposes includes
“‘all persons whose pecuniary interests are directly affected by the bankruptcy
proceedings.’” In re Boyd, 618 B.R. at 146 (quoting Yadkin Valley Bank & Trust Co.
v. McGee (In re Hutchinson), 5 F.3d 750, 756 (4th Cir. 1993)) (internal citations
omitted).
For additional guidance in determining who qualifies as a “party in interest,”
many courts look to the definition set forth in 11 U.S.C. § 1109(b). Section 1109(b)
states that a “party in interest” includes, but is not limited to, “the debtor, the
trustee, a creditor’s committee, an equity security holders’ committee, a creditor, an
equity security holder, or any indenture trustee...”
The Supreme Court has recently discussed the meaning of the term, holding
“party in interest” is “capacious” and covers any party whose “financial exposure
may be directly and adversely affected by a plan ....” Truck Ins. Exch., Inc. v. Kaiser
Gypsum Co., 602 U.S. 268, 284 (2024). “This understanding aligns with [the
Supreme Court’s] observation that Congress uses the phrase ‘party in interest’ in
bankruptcy provisions when it intends the provision to apply ‘broadly.’” Id. at 278
(citing Hartford Underwriters Ins. Co. v. Union Planters Bank, N. A., 530 U.S. 1,
(2000)); see also 11 U.S.C. § 502(a). While § 1109(b) is limited15 to cases under
chapter 11, this Court and others have applied the “party in interest” concept to
analyze the term as it pertains to a party’s right to be heard in Chapter 7 cases. See
15 The Supreme Court has cautioned against using the term beyond the scheme to which it is related
but notes that the term has been construed in other contexts as including those directly and
adversely affected by the outcome of a proceeding. Truck Ins. Exch., 602 U.S. at 279, n.4 (citing
Western Pacific California R. Co. v. Southern Pacific Co., 284 U.S. 47, 51–52 (1931)).
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In re Taylor, No. CA 11-00156-DD, 2011 WL 3206994, at *3 (Bankr. D.S.C. July 27,
2011) (finding that a creditor in a chapter 7 case is a party in interest under § 1109
and therefore may object to the Trustee’s motion to sell property of the estate free
and clear of liens).
As discussed below, First Financial is a creditor with a pecuniary interest in
the estate that may be directly affected if this case is reopened. Therefore, under the
big tent interpretation of Truck Ins. Exch., First Financial is a party in interest
with a right to be heard on Debtor’s requested relief.
a. First Financial’s Status as a Creditor
“The terms ‘debt’ and ‘claim’ are coextensive: a creditor has a ‘claim’ against
the debtor; the debtor owes a ‘debt’ to the creditor.” S.Rep. No. 989, 95th Cong., 2d
Sess. 23, reprinted in 1978 U.S.C.C.A.N. 5787, 5809; H.R.Rep. No. 595, 95th Cong.,
2d Sess. 310, reprinted in 1978 U.S.C.C.A.N. 5963, 6267. “By this broadest possible
definition ... the bill contemplates that all legal obligations of the debtor, no matter
how remote or contingent, will be able to be dealt with in the bankruptcy case.”
S.Rep. No. 595, 95th Cong., 2d Sess. 22, reprinted in 1978 U.S.C.C.A.N. 5787, 5808;
H.R.Rep. No. 95–595, 95th Cong., 2d Sess. 309, reprinted in 1978 U.S.C.C.A.N.
5963, 6266.
This statutory intent is reflected in the Code’s definition of “claim” as a “right
to payment.” 11 U.S.C. § 101(5). Even a claim that is disputed is nevertheless a
claim as the Code defines the term. In re Knight, 55 F.3d 231, 234 (7th Cir. 1995). A
“creditor,” in turn, is defined as an entity holding a “claim against the debtor.” 11
U.S.C. § 101(10). Again, regardless of whether the claim is disputed, the claim
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holder is still treated as a creditor in a bankruptcy case. B-Real, LLC v. Chaussee
(In re Chaussee), 399 B.R. 225, 233 (B.A.P. 9th Cir. 2008).
State law usually determines whether a party has a “right to payment.”
Midland Funding, LLC v. Johnson, 581 U.S. 224, 228 (2017). Actions to recover
debts in South Carolina must generally16 be brought within three years of the
default on the debt. S.C. Code Ann. § 15–3–530 (2015). This bar only effects the
remedy available to a collecting party rather than the underlying right: it does not
erase the debt. In re Vaughn, 536 B.R. 670, 677 (Bankr. D.S.C. 2015) (internal
citations omitted); Amaker v. New, 33 S.C. 28, 11 S.E. 386, 387 (S.C. 1890) (holding
under South Carolina law that the statute of limitations “does not operate as the
payment of the debt”). An unenforceable obligation is nonetheless a “right to
payment,” and therefore a “claim,” under the Bankruptcy Code. Midland Funding,
581 U.S. 224 at 229.
First Financial asserted that, after the repossession and liquidation of
Debtor’s vehicle, Debtor owed a balance of $4,187.57. Debtor asserts First Financial
was not a creditor when this bankruptcy case was filed and, therefore, not a party
in interest, because any claim First Financial may have had was stale. However,
Debtor’s Response to First Financial’s Objection concedes that Debtor and First
Financial entered into a loan agreement in 2007, and Debtor breached the loan
agreement in the same year.17 Further, at the hearing, Debtor’s counsel agreed that
16 Actions for breach of a bond, a contract secured by a mortgage of real property, and certain sealed
instruments must be brought within 20 years under S.C. Code Ann. § 15–3–520 (2015). As First
Financial’s loan was secured by Debtor’s vehicle, and not real property, the three year limitation
period prescribed in § 15–3–530 applies.
17 See ECF No. 26, p. 3.
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it was “beyond dispute” that after Debtor’s default on the loan agreement, First
Financial sent Debtor a demand letter, declared Debtor in default, repossessed
Debtor’s vehicle, sold the vehicle, and notified Debtor via letter that he still owed
First Financial money after the proceeds from the sale of the vehicle were applied to
his deficiency.18 By Debtor’s own description, First Financial had a claim for a
deficiency against Debtor. Though that claim may be stale, First Financial is still a
“creditor” as that term is defined in the Code. See Amaker v. New, 33 S.C. 28, 11
S.E. at 387; Midland Funding, 581 U.S. 224 at 229. Whether First Financial’s claim
would ultimately be allowed is an issue for another day, but the Supreme Court’s
holding in Midland Funding is clear: the Court should not speculate as to what may
happen during the claim allowance process when making this threshold
determination as to whether First Financial is a creditor. Since First Financial is a
creditor, it has statutory right to be heard as a party in interest to oppose Debtor’s
Motion to Reopen.
b. First Financial’s Status a Party with a Pecuniary Interest
Moreover, the State Court Litigation is premised on the existence of a pre-
petition creditor/debtor relationship between First Financial and Debtor and should
have been disclosed as an asset. 11 U.S.C. § 521(a)(1)(B)(i). Rather than schedule
the State Court Litigation as an asset, Debtor only disclosed the action in the
Statement of Financial Affairs as a dispute that ended prior to the commencement
of this bankruptcy case. Had Debtor properly scheduled the State Court Litigation,
18 See ECF No. 41, 23: 24–24:3.
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the action would an asset for the trustee to administer.
Debtor, arguably, is not the real party in interest in the State Court
Litigation, following the filing of his 2013 chapter 7 petition.19 Martineau v. Weir,
934 F.3d 385, 391 (4th Cir. 2019). First Financial has incurred costs defending the
suit since this bankruptcy case was filed. Debtor’s requested relief may further
prolong the litigation, require First Financial to dedicate additional resources to its
defense, and blunt First Financial’s ability to use a judicial estoppel defense in the
State Court Litigation. See Smidt v. Nationstar Mortgage LLC (In re Smidt), No.
BAP CC-24-1071-FGL, 2025 WL 863113, at *7 (B.A.P. 9th Cir. Mar. 19, 2025)
(holding a defendant in state court litigation brought by the debtor had standing as
a party in interest to object to the debtor’s motion to reopen the case because if the
case had been reopened, the defendant would have had to incur additional
attorneys’ fees defending against the debtor’s state court claims and might have lost
a judicial estoppel defense). The costs First Financial has and will continue to incur
in defending the State Court Litigation are a pecuniary interest directly affected by
this bankruptcy imbuing First Financial with statutory status as a party in
interest. In re Boyd, 618 B.R. at 146.
II. Article III Standing
Questions concerning the right to be heard as a party in interest in a
bankruptcy case are often considered alongside questions of constitutional standing.
Because this Court traffics in assets, obligations, and the adjustment of the
19 This sentence is amended from Order entered August 12, 2025.
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debtor/creditor relationship, the overlap between the two is nearly seamless.
However, the Circuits are split over whether the “right to be heard” as a party in
interest incorporates Article III's requirements for standing or imposes more
stringent limitations.20
Debtor asserts that First Financial must also have Article III standing for the
Court to consider its objection. Debtor cites this Court’s opinion in Boyd in support
of this assertion. However, the facts of Boyd are different and, since that case was
decided, the Fourth Circuit and the Supreme Court have cast doubt on the notion
that a party objecting to relief in this Court must demonstrate Article III standing
to be heard.
As courts are split on whether the party in interest standard equates to
Article III standing, the courts are also split on whether Article III’s case-or-
controversy requirement even applies to this Court. The Third, Seventh, Eighth,
and Tenth Circuits have reasoned that Article III standing requirements apply in
proceedings before bankruptcy courts because Article III limitations apply to federal
courts and bankruptcy courts are federal courts, without analyzing the issue
further.21 In contrast, the Fifth Circuit has concluded that Article III standing
20 Compare In re Global Indus. Techs., Inc., 645 F.3d 201, 211 (3d Cir. 2011) (bankruptcy standing is
coextensive with Article III standing) with Hughes v. Tower Park Props., LLC (In re Tower Park
Props., LLC), 803 F.3d 450, 456–57, n.6 (9th Cir. 2015) (bankruptcy standing is more restrictive than
Article III standing); see also Carl F. Schier PLC v. Nathan (In re Cap. Contracting Co.), 924 F.3d
890, 895 (6th Cir. 2019). They are also split over whether it applies outside of Chapter 11
bankruptcies. See Id. The Fourth Circuit has declined to explicitly confront either of these questions.
See Kiviti v. Bhatt, 80 F.4th 520, 534, n.11 (4th Cir. 2023).
21 See In re Glob. Indus. Techs., Inc., 645 F.3d 201, 210 (3d Cir. 2011) (“To object to the confirmation
of a reorganization plan in bankruptcy court, a party must, in the first instance, meet the
requirements for standing that litigants in all federal cases face under Article III of the
Constitution.”); Rosenfeld v. Rosenfeld (In re Rosenfeld), 698 F. App'x 300, 303 (6th Cir. 2017)
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requirements do not apply to bankruptcy courts because bankruptcy courts are not
authorized by Article III.22
The Fourth Circuit has recently issued conflicting decisions on whether
Article III jurisdictional constraints apply to bankruptcy courts: Truck Ins. Exch. v.
Kaiser Gypsum Co., Inc. (In re Kaiser Gypsum Co., Inc.), 60 F.4th 73 (4th Cir.), cert.
granted sub nom., 144 S. Ct. 325 (U.S. Oct. 13, 2023) (No. 22-1079), and rev'd and
remanded sub nom., Truck Ins. Exch. v. Kaiser Gypsum Co., Inc., 602 U.S. 268
(2024), and Kiviti v. Bhatt, 80 F.4th 520 (4th Cir. 2023), cert. denied, 144 S. Ct. 2519
(May 13, 2024) (No. 23-729).
In Kaiser Gypsum, the Fourth Circuit held an insurer could not object to the
debtor’s chapter 11 plan because it failed to establish an injury in fact and therefore
did not demonstrate its standing to object under Article III, which is “still required
in every case.” Id., 60 F.4th 73, 88; n.10. The Fourth Circuit further held that the
(applying the case or controversy requirement to adversary proceedings in bankruptcy courts and
asserting federal courts “may decide only ‘cases’ and ‘controversies.’ ”); GAF Holdings, LLC v.
Rinaldi (In re Farmland Indus., Inc.), 639 F.3d 402, 405 (8th Cir. 2011) (Article III standing before a
bankruptcy court is required because “federal courts must ensure that Article III standing exists.”);
Pettine v. Direct Biologics, LLC (In re Pettine), 655 B.R. 196, 207 (10th Cir. BAP (Colo.) 2023)
(holding Article III standing limits the jurisdiction of bankruptcy courts “based on the derivative
nature of bankruptcy court jurisdiction.”). The courts which hold that Article III case or controversy
limitations apply to bankruptcy court proceedings generally arrive at that conclusion due to the fact
that bankruptcy courts derive their jurisdiction through the same statutory jurisdictional provision
as the district courts, 28 U.S.C. § 1334, with all bankruptcy cases, matters, and proceedings being
referred to the bankruptcy courts by the district courts through general orders of reference.
22 NexPoint Advisors, L.P., v. Pachulski Stang Ziehl & Jones, L.L.P. (In re Highland Cap. Mgmt.,
L.P)., 74 F.4th 361, 366 (5th Cir. 2023) (“Bankruptcy courts are not authorized by Article III of the
Constitution, and as such are not presumptively bound by traditional rules of judicial standing.”);
Furlough v. Cage (In re Technicool Sys., Inc.), 896 F.3d 382, 385 (5th Cir. 2018) (“Bankruptcy courts
are not Article III creatures bound by traditional standing requirements.”). The Fifth Circuit's
conclusions in Highland Capital Management and Technicool that bankruptcy courts are not subject
to Article III jurisdictional constraints are arguably dicta because, in both cases, the court concluded
that the “person aggrieved” test, which applies to standing to appeal a bankruptcy court decision, is
more stringent than the Article III standing requirement and the appellant in each case did not
satisfy that requirement. 74 F.4th at 366–67, 896 F.2d at 385–86.
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insurer lacked standing as a party in interest under 11 U.S.C. § 1109 because the
plan, under which the insurer’s general unsecured claim was fully satisfied, did not
affect the insurer’s legally protected interest. Id.
Following appeal, Kaiser Gypsum was reversed and remanded. See Truck Ins.
Exch., 602 U.S. 268 (2024). The Supreme Court held that the insurer was a party in
interest with standing to object to the plan due to its financial responsibility for
claims against the debtor under 11 U.S.C. § 1109 and did not address the Fourth
Circuit’s holding that standing under Article III is required for parties raising
objections in bankruptcy cases.23 Id., 602 U.S. at 280–281.
In Kiviti v. Bhatt, the Fourth Circuit held once a case is validly referred to a
bankruptcy court under 28 U.S.C. § 157, the constraints of Article III—such as
mootness, or the case-or-controversy requirement—no longer apply as a matter of
constitutional law. Id., 80 F.4th at 536. The Fourth Circuit reasoned that a district
court can only refer a case that it has jurisdiction over to a bankruptcy court, and as
every action by a district court is constrained by Article III, any case that is referred
to the bankruptcy court must satisfy Article III. Id., 80 F.4th at 533 (citing Ex parte
McCardle, 74 U.S. 506, 514 (1868); Motor Vehicle Cas. Co. v. Thorpe Insulation Co.
(In re Thorpe Insulation Co.), 677 F.3d 869, 880 (9th Cir. 2012); and Croniser v.
23 The Bankruptcy Court for the District of Delaware held that recent Supreme Court authority,
including Truck Ins. Exch., indicate that a party objecting to relief in bankruptcy court does not need
to demonstrate Article III standing to be heard on the basis that the objecting party is not invoking
the court’s jurisdiction. In re AIO US, Inc., No. 24-11836 (CTG), 2025 WL 1617477, at *7 (Bankr. D.
Del. June 6, 2025). In the context of Truck Ins. Exch., the District of Delaware specifically noted “if
the Supreme Court believed that the question of insurer standing to object to confirmation
implicated Article III of the Constitution, [one would expect] the Court to have considered and
addressed that question before turning to the statutory issue.” Id., 2025 WL 1617477, at *4.
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Butler (In re Croniser), No. 22-1227, 2022 WL 7935991, at *1 (4th Cir. Oct. 14, 2022)
(unpublished)).
However, “[o]nce a case is validly referred to the bankruptcy court, the
Constitution does not require it be an Article III case or controversy for the
bankruptcy court to act,” as the Article III case or controversy requirement comes
from the Constitution’s limits on judicial power, and Bankruptcy Courts do not
wield judicial power. Id. (citing In re Technicool Sys., Inc., 896 F.3d 382, 385 (5th
Cir. 2018)) (“Bankruptcy courts are not Article III creatures bound by traditional
standing requirements.”). Further, the Fourth Circuit reasoned that bankruptcy
courts, “as statutory creatures, have whatever power Congress lawfully gives them.”
Id. 28 U.S.C. § 157(b)(1) grants bankruptcy courts power to “hear and determine all
[bankruptcy] cases … and all core proceedings … referred” to them by a district
court—not just those proceedings that could be fully adjudicated in a district court.
Id., 80 F.4th at 533 (4th Cir. 2023). As 28 U.S.C. § 157(b)(1) does not include
language requiring proceedings before a bankruptcy court meet Article III’s “case or
controversy” requirement, the Fourth Circuit declined to impose such a
requirement. Id., 80 F.4th at 534 (citing Antonin Scalia & Bryan A. Garner,
Reading Law: The Interpretation of Legal Texts 96 (2012)) (“[W]hat a text does not
provide is unprovided.”).
The Fourth Circuit does not render an explicit holding as to whether Article
III standing is required for parties raising objections in bankruptcy courts in Kiviti.
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The Court need not reconcile the divergent interpretations of 28 U.S.C. § 15724 in
this case, because, if Article III standing is required, First Financial has it.25
“To establish constitutional standing, the party must first ‘have suffered an
injury in fact—an invasion of a legally protected interest which is (a) concrete and
particularized, and (b) actual or imminent, not conjectural or hypothetical[.]’” In re
Boyd, 618 B.R. 133, 146 (Bankr. D.S.C. 2020) (quoting Lujan v. Defs. of Wildlife,
504 U.S. 555, 560 (1992) (internal citations omitted). Second, the party must
establish that the injury in fact is traceable to the conduct at issue. Lujan, 504 U.S.
at 560. “Finally the party must show that it is ‘likely’, as opposed to merely
‘speculative,’ that the injury will be ‘redressed by a favorable decision.’” Id., 504 U.S.
at 561 (quoting Simon v. Eastern Ky. Welfare Rights Organization, 426 U.S. 26, 41–
42 (1976)).
Debtor’s Response to First Financial’s Objection26 accurately notes this Court
has found the defendant in a debtor’s post-petition tort suit lacked constitutional
standing to file a motion to reconsider an order reopening the debtor’s bankruptcy
case based on the potential loss of a defense in the tort suit, which the Court
deemed too speculative to constitute an injury in fact. See In re Boyd, 618 B.R. at
146. However, unlike the defendant in Boyd, First Financial’s injury in fact does not
depend on the outcome of an unscheduled claim. First Financial has suffered an
injury in fact: it has incurred costs over the last 12 years defending the State Court
24 See, supra, n. 21, n. 22. See also White-Lett v. NewRez, Inc., 661 B.R. 63, 84 (N.D. Ga. 2024).
25 See Sanders v. First Recovery, LLC, No. 5:23-CV-00553-FL, 2024 WL 4164163, at *3, n.5 (E.D.N.C.
Aug. 6, 2024).
26 See ECF No. 27, p. 4.
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Litigation, which was initiated pre-petition and that Debtor may have had no right
to pursue once this case was filed. Those costs are not speculative. See In re Smidt,
2025 WL 863113, at *6 (holding that a state court defendant’s litigation costs,
incurred over eight years defending a lawsuit that the debtor failed to properly
schedule in his Chapter 7 case, were an injury in fact and the defendants therefore
had Article III standing to object to the debtor’s third motion to reopen the case).
Debtor’s requested relief could further prolong the State Court Litigation and
require First Financial to dedicate additional resources to its defense. At this stage,
First Financial has made sufficient factual allegations of an injury in fact to support
standing under Article III to object to Debtor’s Motion to Reopen the case. That
injury is traceable to conduct of Debtor and may be redressed by hearing the merits
of both Debtor’s Motion to Reopen and First Financial’s opposition to it.
A hearing on the merits of Debtor’s Motion to Reopen and the objection by
First Financial shall be heard on September 9, 2025. In addition to the
requirements of the Scheduling Order entered July 22, 2025, the parties are
directed to file a joint statement of dispute on or before September 2, 2025, using
the appropriate local form.
AND IT IS SO ORDERED.
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