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Curt Brown & Stephanie Brown v. JD Peterson & Dawn E. Peterson (In re Peterson), Ch. 7, BK20-40028-TLS, A20-4008-TLS (Aug. 30, 2021)

After a trial on objections to discharge, the court ruled in favor of the plaintiffs and denied the debtors a discharge under § 727(a)(2) (transfer or concealment of property with intent to hinder, delay, or defraud a creditor) and § 727(a)(4)(A) (false oaths or accounts).

The court found that the debtors intentionally failed to disclose (1) their interest in two bank accounts they used for personal and business expenses, (2) their ownership of a parcel of real estate; and (3) the pre-petition transfer of personal property valued at more than $42,000 to the debtor’s mother. Contrary to the debtors’ assertion that the fault for failing to include such information on the bankruptcy schedules lies with their bankruptcy attorney, the court found that the debtors had not bothered to disclose most of the omitted information to the attorney.

In denying the discharge, the court said:

Here, the sheer volume and materiality of the misstatements and omissions demonstrates, at a minimum, reckless indifference to the truth. In fact, the schedules and SOFA appear to be intentionally false, even after two prior amendments.

        Defendants’ schedules and SOFA were and are not accurate or reliable. This is not a situation where there were only one or two innocent omissions; instead, they were numerous. Many were corrected, but only after a creditor went through the effort to dig them out and the trustee re-convened the meeting of creditors. A debtor’s “petition, including schedules and statements, must be accurate and reliable, without the necessity of digging out and conducting independent examinations to get the facts.” In re Sears, 246 B.R. at 347 (citing Mertz v. Rott, 955 F.2d 596, 598 (8th Cir. 1992)). Some omissions have not been corrected at all.
        Accordingly, the Court finds that the elements for denial of discharge under 11 U.S.C. § 727(a)(2) and 11 U.S.C. § 727(a)(4)(A) have been met, and it is not necessary to address the causes of action under § 727(a)(5) or § 523.

Monday, August 30, 2021
Judge Thomas L. Saladino