and scheduled said Association as a secured creditor in that
amount. The Veterans Administration was not mentioned in the
bankruptcy schedule, received no notice of the pending
bankruptcy, and had no actual knowledge of it. Defendant also
listed the real property, subject to the mortgage, as an asset;
but on March 16, 1962, the Trustee in bankruptcy, or order of
the Referee, abandoned said real estate as a burdensome asset
in said proceedings.
From December, 1959, to May, 1964, the defendant (or the tenant
to whom he had vacated the premises) made regular monthly
payments to the Des Moines Savings and Loan Association. In
May, 1964, the payments stopped, and the Association foreclosed
After entry of decree in the Association's favor, the property
was sold in December, 1964, for $10,000. As total indebtedness
on the loan was $12,074.76, the Association claimed the
deficiency of $2,074.76 from the Veterans Administration on its
guarantee. The Veterans Administration paid that sum in April,
1965; and here seeks to recover its payment with statutory
interest, less credits of $48.82, from defendant.
The sole legal question presented is whether the April, 1962,
discharge in bankruptcy discharged the defendant's obligation
of indemnity to the Veterans Administration. The court is
satisfied that it did not.
First, there was no provable debt owed by defendant to the
United States at the time of his discharge in bankruptcy in
April, 1962 because nothing was paid by the Veterans
Administration on behalf of the defendant until April, 1965,
three years after his discharge in bankruptcy. The debt here
involved arose only when it became necessary for the Veterans
Administration to pay the deficiency. 38 C.F.R. § 36.4323(e).
Second, the Veterans Administration was not notified of the
bankruptcy proceedings, and any debt to it, contingent or
otherwise, could not therefore have been discharged under §
17(a) of the Bankruptcy Act which clearly makes notice a
prerequisite to discharge.
"A discharge in bankruptcy shall release a bankrupt from all
his provable debts, whether allowable in full or in part,
except such as * * * (3) have not been duly scheduled in time
for proof and allowance, with the name of the creditor, if
known to the bankrupt, unless such creditor had notice or
actual knowledge of the proceedings in bankruptcy; * * *."
Title 11 U.S.C.A. § 35.
Third, the defendant failed to schedule the Veterans
Administration as a contingent creditor, as he was required to
do by § 7(a) of the bankruptcy statute: