When the Court Has a Duty to Raise Issues Independently

I have been fooling around with my materials for my bankruptcy class coming up next semester.  I was rereading In re Carnduff, a student loan case that confirms that bankruptcy courts can grant a partial discharge of student loans.  The case has a lesson for courts and practitioners on the scope of the court’s right to use its own independent knowledge to reach a conclusion.

Suppose the court says at trial “I know you can your property taxes online contrary to the evidence you presented.”   Shouldn’t the court then give the party a chance to rebut this “evidence”?  

In Carduff the court commented, at the end of the trial, that someone with the debtor’s experience could find jobs.  To which the BAP said:

We are also concerned that the way in which the bankruptcy court drew on its own experience and rejected Debtors’ contrary evidence may not have given Debtors a fair opportunity to rebut its concerns about alternative employment.

From the excerpts of record, however, it seems to us that Debtors had little warning that the bankruptcy court was not satisfied with the answers to its questions and would override the only evidence before it based on its own view that Debtors could earn more outside of their fields.  The bankruptcy court should consider on remand whether additional procedures are required to assure that Debtors have had a fair opportunity to present rebuttal evidence.

 In a footnote, the BAP said,

In the analogous context of fee applications, in which the bankruptcy court has a duty to raise issues even if no party in interest does so, the Ninth Circuit has cautioned that the bankruptcy court sometimes “simulates the role of an adversary, albeit to a circumscribed degree,” and it should apprise parties of “the particular questions and objections it harbors” and give them “an opportunity to rebut or contest the court’s conclusions.”

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