Trustee Blog

727(a)(4) Objection to Discharge

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Chapter 7 Trustee Simons may object to a discharge.  In our discussion from Nov. 28, a debtor hid a vehicle  and the creditor sued him under 727(a)(4). Below is Judge Houle’s further discussion.

c. Objection to Discharge under §727(a)(4)

A discharge may be denied if debtor has made a false oath, claim or promise, or withheld information from any officer of the estate, in connection with the case. 11 U.S.C. 727(a)(4). Discharge will be denied where:

• the debtor made a false oath in connection with the bankruptcy case; • the oath related to a material fact;
• the oath was made knowingly; and
• the oath was made fraudulently.

Retz v. Samson (In re Retz), 606 F. 3d. 1189, 1197 (9th Cir 2010); In re Roberts, 331 B.R. 876, 882 (B.A.P. 9th Cir 2005).

In support of their claim, Plaintiff asserts the following facts in its Complaint:

Creditor objects to Defendant’s discharge on the grounds that Defendant knowingly and fraudulently made false oaths in this case, including but not limited to, failure to disclose assets on his bankruptcy “Schedule B” herein and false statements under oath at his 341(a) Meeting of Creditors in his above- referenced Chapter 7 bankruptcy case.

Under the penalty of perjury, Defendant certified that his bankruptcy schedules and testimony herein were true and correct to the best of his knowledge, information, and belief, when in truth and fact, Defendant then well knew that his bankruptcy schedules and testimony contained material false statements and failed to truthfully explain the loss of Creditor’s Collateral.

A false oath under Section 727(a)(4) can involve a false oath statement or omission in the debtor’s schedules. In re Khalil, 379 B.R. 163, 172 (B.A.P. 9th Cir. 2007); Matter of Beaubouef, 966 F.2d. 174, 178 (5th Cir. 1992). A knowingly and fraudulent false statement made during the 341(a) Meeting of Creditors is a false oath for which the debtor may be denied a discharge. In re Braidis, 27 B.R. 470, 472 (Bankr. Penn. E.D. 1983).

Here, Plaintiff provides that the pleadings, records, and files in this case show that Defendant made a false statement or omission in his bankruptcy schedules and made a false statements made during his 341(a) Meeting of Creditors. Debtor failed to disclose the existence of NICU’s Vehicle on his Schedule B or Schedule D. As such, the facts pled taken as true, Defendant made a false statement.

ii. Material Fact

A fact is material ‘if it bears a relationship to the debtor’s business transactions or estate, or concerns the discovery of assets, business dealings, or the existence and disposition of the debtor’s property.’” In re Retz, 606 F. 3d at 1198 (citing In re Khalil, 379 B.R. at 173 (quoting In re Wills, 243 B.R. at 62). An omission or misstatement that “detrimentally affects administration of the estate” is material. In re Wills, 243 B.R. at 63 (citing 6 Lawrence P. King et al., Collier on Bankruptcy ¶ 727.04[1][b] (15th ed. rev.1998)). A false statement or omission may be material even if it does not cause direct financial prejudice to creditors. In re Bernard, 96 F. 3d 1279, 1281-1282 (9th Cir 1996); United States v. Lindholm, 24 F.3d. 1078, 1083 (9th Cir 1994).

Here, Defendant failed to disclose the Vehicle, an asset of the estate, in his Schedules and failed to disclose the disposition of said Vehicle. As such, the fact was material.

iii. Knowingly

“A debtor ‘acts knowingly if he or she acts deliberately and consciously.’” In re Khalil, 379 B.R. at 173 (quoting In re Roberts, 331 B.R. at 883). Here, Defendant deliberately and consciously signed the Schedules knowing that they were incomplete.

iv. Fraudulently

 

“To demonstrate fraudulent intent, [Plaintiff] must show: ‘(1)[Defendant] made the representations [e.g., a false statement or omission in bankruptcy schedules]; (2) … at the time he knew they were false; [and] (3) … he made them with the intention and purpose of deceiving the creditors.’” In re Retz, 606 F. 3d at 1198–1199 (citing In re Khalil, 379 B.R. at 173 (quoting In re Roberts, 331 B.R. at 884). Fraudulent intent can be proved by circumstantial evidence. Matter of Sholdra, 249 F.3d. 380, 382 (5th Cir. 2001); In re Wills, 243 B.R. 58, 64 (B.A.P. 9th Cir. 1999).

Here, Defendant made the representations on his Schedules. Plaintiff alleges that Defendant knew that he owned the Vehicle and at the time of signing his Schedule, he knew that the representations he made were false. Plaintiff further alleges that Defendant made these statements in an attempt to defraud Creditor from recovering the Vehicle.

For the foregoing reasons, Plaintiff has established that Defendant should be denied discharge under 11 U.S.C. § 727(a)(4).

 

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