A First and Final Accounting hearing was held on May 5, 1992.

      On April 30, 1992, the debtor objected to distribution on the grounds that a pre-petition claim of Jack and Delores Gakey existed which debtor had not scheduled, believing that the Gakeys were joint business venturers and not creditors of debtor.

      The Gakeys had sued in state court for $7,600 in June, 1991, and got a default judgment. The debtor's April 30, 1992 motion seeks a to delay distribution so that he can amend his schedules to list the Gakeys.

      At the May 5, 1992 final accounting hearing, I tried to call Bruce Rausch, debtor's new attorney, to discuss the motion, but he was not in his office. The motion raises two issues: (a) dischargeability of the Gakey claim, and (b) the Gakeys' right to a share of the distribution. They are interrelated matters, since, if a distribution is made before the Gakeys can file a tardy proof of     2 ABR 396  claim, the debtor's discharge of this claim may be denied, at least in part. 11 USC § 523(a)(3).

      Amending the schedules alone will not affect the dischargeability of the Gakey claim at this late date. To establish dischargeability, an adversary proceeding must be brought under 11 USC § 523(a)(3) in the Bankruptcy Court or some court with concurrent jurisdiction under 28 USC § 1334(b). See, In re Brosman, 1 ABR 165 (BankrD AK 1991), In re Ford, 87 BR 641 (BankrD Nev 1988), and In re Hendricks, 87 BR 114 (BankrCD Cal 1988).

      Whether the Gakeys can participate in the intended distribution is governed by 11 USC § 726(a)(2)(C) which permits a tardily filed claim to be treated as if it were timely if the creditor had no notice or knowledge of the bankruptcy in time to file a timely proof of claim, and the tardy claim is filed in time to permit payment of such claim.

      Without the Gakey claim, the general unsecured creditors with claims of about $7,000.00, were going to get about 97% of their claims paid. If the Gakey claim is allowed, it will probably take over 50% of the available dividends leaving these creditors with less than 50¢ on the dollar.

      At the final hearing, I indicated that I would allow the Gakeys' 15 days to file a proof of claim. On reflection, I will reverse that position and approve the final accounting as filed, without allowing a late filed claim by the Gakeys. The debtor knew about the Gakey problem almost a year ago when he was sued in June of 1991. He (or his former attorney) could have sought a § 523(a) ruling in the state court action or in this court. Debtor or his     2 ABR 397  former attorney could have suggested that the Gakeys file a tardy claim in this case almost a year ago which may have entitled the Gakeys to a prorated recovery of their claim under § 726(a)(2)(C).

      Debtor even now disputes the validity of the Gakeys' claim, so disrupting or delaying the distribution originally proposed by the trustee may have the effect of allowing payment to an unwarranted claim by the estate. I believe it is more equitable to let the trustee make his final distribution instead of rewarding the debtor for his lack of diligence in correcting his oversight. Therefore,

      IT IS ORDERED that debtor's motion to delay distribution is DENIED.