This is an adversary proceeding seeking denial of discharge for transferring property with intent to hinder, delay or defraud a creditor. The plaintiffs alternatively ask the court to except the debt from discharge under § 523(a)(2)(A), (a)(4), or (a)(6).
The debtor intended to purchase a restaurant owned by the plaintiffs. They entered into an employer/employee relationship with an anticipated buyout agreement. The debtor operated the business for three months with oversight from the plaintiffs, who lived out of state. The restaurant closed permanently after suffering damage in a fire, the debtor filed a Chapter 7 proceeding, and the plaintiffs filed this adversary proceeding alleging they were owed $62,000.
After a careful and extensive review of the evidence at trial, the bankruptcy court concluded that all but $1,300 of the debt should be discharged. The plaintiffs did not establish the elements of § 727(a)(2)(A), and the evidence did not support the allegations of false representations made with the intent to deceive or the existence of a fiduciary relationship. At most, there was evidence that the debtor removed some property from the restaurant premises after the fire, and such conduct was intentional and with the knowledge that it would harm the plaintiffs. The $1,300 value of the items taken was excepted from discharge under § 523(a)(6).