McDermott v. Graft (In re Graft), 489 B.R. 65

Debtor Keithette Marlene Graft filed a Chapter 7 petition on March 2, 2012 (Pending Case).
Previously, she filed a separate Chapter 7 case (Prior Case) commenced in September 2009, which discharged on June 1, 2010.
The Prior Case involved unsecured nonpriority claims later listed as Common Debts in the Pending Case.
Trustee settlement required the Debtor to pay $2,850.17 to the estate and turn over a 2010 tax refund to satisfy the obligation.
An Agreed Order (August 13, 2010) obligated turnover of 2010 refunds to pay the obligation and provided revocation mechanics if default occurred.
The Trustee filed an Affidavit of Default on June 6, 2011; the court issued a Revocation Order revoking the Debtor’s discharge, and the Prior Case closed on November 18, 2011.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether § 523(a)(10) renders Common Debts nondischargeable	UST contends § 523(a)(10) applies because the debts were scheduled in a prior case and the prior discharge was revoked for misconduct.	Graft contends the revocation was for failure to comply with an agreed order and does not equate to misconduct that would have denied the discharge under § 727(a)(2)-(7).	Common Debts are not nondischargeable under § 523(a)(10).
Did the prior discharge revocation based on misconduct that would have denied discharge under § 727(a)(2)-(7)?	UST argues the revocation should be treated as denying discharge for purposes of § 523(a)(10).	Graft asserts the revocation arose from failure to comply with an agreed order, not willful misconduct warranting denial under § 727(a).	Revocation here was based on noncompliance, not a finding of refusal; § 523(a)(10) does not apply.
Whether the revocation process satisfied ‘after notice and a hearing’ requirements to support § 727(d)(3) revocation and subsequent § 523(a)(10) impact	UST asserts proper notice and hearing existed under § 727(d)(3).	Graft argues the procedure did not hinge on a finding of refusal and the hearing was not necessary.	Notice and opportunity to cure under the Agreed Order sufficed; no hearing was required for revocation under those terms.

In re Klapp, 706 F.2d 998 (9th Cir. 1983) (read § 523(a)(9)/(a)(10) to apply when discharge is revoked for misconduct that would have denied discharge)
In re Mendoza, 16 B.R. 990 (Bankr.S.D.Cal. 1982) (discusses that debts scheduled in later cases may be nondischargeable if discharge denied in prior case)
In re Faber, 330 B.R. 235 (Bankr.N.D.Ind. 2005) (discusses denial vs. revocation distinctions and applicability of § 523(a)(10))
In re Markovich, 207 B.R. 909 (9th Cir. BAP 1997) (addressed standing and authority to seek discharge revocation under § 727(d))
Family Inv. v. Citizens Bank, 8 B.R. 572 (Bankr.W.D.Ky. 1981) (agreed orders bind the parties; failure to comply can be actionable without a separate consent order)