County of Sonoma v. McKusick

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re
ROBERT C. McKUSICK, No. 99-13323
Debtor(s).
______________________________________/
COUNTY OF SONOMA,
Plaintiff(s),
v. A.P. No. 05-1069
ROBERT C. McKUSICK,
Defendant(s).
_______________________________________/
Memorandum re Prepetition Debt
_________________
The parties have submitted this case to the court on stipulated facts. These facts are insufficient
for the court to make a determination of dischargeability pursuant to § 523(a)(3) of the Bankruptcy
Code as interpreted by In re Beezley, 994 F.2d 1433 (9th Cir. 1993). However, they are sufficient for
the court to resolve the central issue of the case, which is whether the debt in question is considered a
prepetition or postpetition debt.
Debtor Robert McKusick is a former Sonoma County Sheriff’s Deputy. He became disabled in
Entered on Docket
October 25, 2005
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 05-01069 Doc# 12 Filed: 10/25/05 Entered: 10/25/05 15:56:02 Page 1 of 2

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1998 and began receiving long term disability payments under a plan which required him to reimburse
the county if he was granted disability retirement benefits for the same period. McKusick filed his
Chapter 7 bankruptcy petition on November 1, 1999. Six months later, he was awarded disability
retirement benefits and received a lump-sum payment covering the period during which he received
disability payments.
There is no doubt at all that the County’s claim for reimbursement is a prepetition debt subject to
the bankruptcy discharge unless excepted by § 523(a)(3). Section 101(12) of the Code defines “debt”
liability on a claim; § 101(5) defines “claim” as any right to payment, whether or not contingent or
unmatured. The terms of the long term disability plan create a contingent debt: if retirement benefits are
granted for the same period, the benefits must be repaid. It is irrelevant that the event which made the
debt actual rather than contingent happened postpetition. As McKusick correctly points out, all legal
obligations, no matter how remote or contingent, are subject to the bankruptcy discharge. In re Jensen,
995 F.2d 925 (9th Cir. 1993).
The stipulated facts are silent as to the source of the retirement funds, so the court cannot
determine if there is any right to a setoff; the court makes no ruling on this issue as well as those noted in
the first paragraph above. However, in further proceedings it shall be without controversy that the debt
in question is prepetition.
Counsel for both parties shall appear for a scheduling conference on November 28, 2005, at 2:00
P.M. Appearance is mandatory and may not be waived by stipulation, although the parties may stipulate
to a continuance.
Dated: October 25, 2005
SAlan Jaroslovsky
U.S. Bankruptcy Judge
Case: 05-01069 Doc# 12 Filed: 10/25/05 Entered: 10/25/05 15:56:02 Page 2 of 2