Discharge Objection

DISCHARGE- Objection to Discharge and Revocation

In re Retz, 606 F.3d 1189 (9th Cir. 2010)

1. Debtor who filed incomplete schedules that he failed to read before signing, and that

failed to disclose numerous items of property and transfers, constituted false oaths under §

727(a)(4), where debtor knew they were inaccurate, but intended to amend them later. Reckless

indifference to the truth constitutes evidence of fraudulent intent.

2. Debtor’s transfer of his house to his brother and the transfer of estate property met the

elements of § 727(a)(2).

3. Failure to satisfactorily explain the loss of assets justified denial of discharge under §

727(a)(5).

In re Caneva, 550 F.3d 755 (9th Cir. 2009)

Bankruptcy court properly denied debtor’s discharge under § 727(a)(3) by summary

judgment, where the debtor owned 15 business entities but had no records as to any of them. The

debtor also had no documentation regarding a $500,000 brokerage fee for a $20 million loan.

Debtor’s conclusory statement in an affidavit that the circumstances of his businesses justified the

absence of records was insufficient to rebut the plaintiff’s prima facie case.

In re Khalil, 379 B.R. 163, 177 (9th Cir. BAP 2007), aff’d, 578 F.3d 1167 (9th Cir. 2009)

“Debtor’s discharge cannot be denied under § 727(a)(4) unless his false statements or

omissions were made “knowingly and fraudulently.” Recklessness by itself will not suffice, but

recklessness combined with other circumstances can support an inference that he acted with

knowing and fraudulent intent.”

In re Beverly, 374 B.R. 221 (9th Cir. BAP 2007), aff’d in part and dismissed in part, 551 F.3d

1092 (9th Cir. 2008)

Debtor who, by way of a marital settlement agreement, exchanged his right to proceeds

from the sale of the marital residence for wife’s interest in an exempt ERISA-qualified pension

plan, made a transfer with intent to hinder, delay or defraud under both California’s UFTA and §

727(a)(2). The combination of the size of the transfer and the fact that it left the debtor with no

assets with which to pay the debtor put this case outside the realm of legitimate pre-bankruptcy

planning.

In re Hansen, 368 B.R. 868 (9th Cir. BAP 2007)

1. Debtor, who was an attorney, could not reasonably rely upon advice of counsel as to a

deed of trust that was forged, and which purported to transfer to her mother a $115,000 security

interest in her house; 2. Sheer number of inaccuracies in the schedules justified finding of

knowing and fraudulent misrepresentations.

In re Roberts, 331 B.R. 876 (9th Cir. BAP 2005), aff’d, 241 Fed.Appx. 420 (9th Cir. 2007)

Lack of finding that the debtor knowingly made a false oath in failing to disclose items of

income, and lack of finding of actual fraudulent intent, required that the denial of debtor’s

discharge under § 727(a)(4) be reversed.

In re Nielsen, 383 F.3d 922 (9th Cir. 2004)

153

Citing with approval In re Bowman, 173 B.R. 922 (9th Cir. BAP 2004), the court held that

there must be a showing under § 727(d)(1) that fraud procured the discharge, rather than merely

that “fraud was in the air.”

In re Searles, 317 B.R. 368 (9th Cir. BAP 2004), aff’d, 212 Fed.Appx. 589 (9th Cir. 2006)

(1) Adversary proceeding under 11 U.S.C. § 727 was not mooted by conversion of case to

chapter 13; (2) court correctly denied debtor’s discharge under §§ 727(a)(2) and (4); complete

review of Ninth Circuit law regarding those sections.

In re Yadidi, 274 B.R. 843 (9th Cir. B.A.P. 2002)

Section 105 does not provide an independent ground for denying debtor’s discharge.

In re Wills, 243 B.R. 58 (9th Cir. B.A.P. 1999)

§727(a)(4) and (2) standards: Value of nondisclosed assets not sole criteria to consider in

determining whether nondisclosure warranted denial of discharge.

In re Lawson, 122 F.3d 1237 (9th Cir. 1997)

Subordination of deed of trust on bankruptcy debtor’s property by parent in favor of private

lender supports inference that debtor retained secret benefit in residual equity in property.

Continuing concealment doctrine.

Transfer not immune even though it occurred more than one year prior to filing.

In re Mereshian, 200 B.R. 342 (9th Cir. B.A.P. 1996)

Oral disclosure of assets and transfers at creditors’ meeting of assets and property transfers

supported finding that no fraud was intended.

In re Bernard, 96 F.3d 1279 (9th Cir. 1996)

Debtor’s removal of money from bank account to avoid enforcement of judgment for

creditor constitutes fraudulent “transfer” that precludes discharge.

In re Roosevelt, 87 F.3d 311 (9th Cir. 1996), opinion amended, 98 F.3d 1169 (9th Cir. 1996), cert.

denied, 520 U.S. 1209 (1997)

For purpose of statute denying discharge for fraudulent property transfers, transfer occurs

when quitclaim deed transfer executed, not when it’s recorded.

In re Cox, 41 F.3d 1294 (9th Cir. 1994)

Wife’s reliance on husband’s record keeping justified.

“As we stated in our earlier opinion in this case, ‘[t]he purpose of [section 727] is to make

the privilege of discharge dependent on a true presentation of the debtor’s financial affairs.’ In re

Cox, 904 F.2d at 1401 (internal quotations and citations omitted). The initial burden of proof

under § 727(a)(3) is on the plaintiff. Fed.R.Bank.P. 4005. ‘In order to state a prima facie case

under section 727(a)(3), a creditor objecting to discharge must show (1) that the debtor failed to

maintain and preserve adequate records, and (2) that such failure makes it impossible to ascertain

the debtor’s financial condition and material business transactions.’ Meridian Bank v. Alten, 958

F.2d 1226, 1232 (3d Cir. 1992). Once the objecting party shows that the debtor’s records are

absent or are inadequate, the burden of proof then shifts to the debtor to justify the inadequacy or

154

nonexistence of the records. Id. At 1233; Cox, 904 F.2d at 1404 n. 5; Matter of Horton, 621 F.2d

968, 972 (9th Cir. 1980); In re Lawler, 141 B.R. 425, 428-29 (9th Cir. B.A.P. 1992).”

In re Kubick, 171 B.R. 658 (9th Cir. B.A.P. 1994)

Elements of § 727(a)(2) and (3) are listed in the disjunctive, and each provides a separate

basis for the denial of debtor’s discharge.

In re Bowman, 173 B.R. 922 (9th Cir. B.A.P. 1994)

“1. Section 727(d)(1)

As a general rule, to obtain relief under section 727(d)(1), the plaintiff must prove that the

debtor committed fraud in fact. Edmonds, 924 F.2d at 180 (10th Cir. 1991). The fraud must be

proven in the procurement of the discharge and sufficient grounds must have existed which would

have prevented the discharge. In re Topper, 85 B.R. 167, 169 (Bankr. S.D. Fla. 1988). The

plaintiff must also prove that it was unaware of the fraud at the time the discharge was granted. Id.

“If a creditor or any other party which might object to a debtor’s discharge has knowledge

of a possible fraud, the burden is on the objecting party to diligently investigate any possibility

(sic) fraudulent conduct before discharge. If the party decides to wait until after discharge, that

party risks dismissal of its section 727(d)(1) action. See Mid-Tech Consulting, Inc. v. Swendra,

938 F.2d 885, 888 (8th Cir. 1991).

“2. Section 727(d)(2)

“As a general rule, a plaintiff must prove that the debtor acquired to became entitled to

acquire property of the estate (sic) and knowingly and fraudulently failed to report or deliver the

property to the trustee, in order to obtain relief under section 727(d)(2). Both elements must be

met and the plaintiff must prove that the debtor acted with the knowing intent to defraud. In re

Yonikus, 974 F.2d 901, 905 (7th Cir. 1992).”

In re Woodfield, 978 F.2d 516 (9th Cir. 1992)

“Badges of fraud” – § 727(a)(2) criteria.

In re Lawler, 141 B.R. 425 (9th Cir. B.A.P. 1992)

Burden of proof on obligation to discharge is preponderance.

In re Dietz, 914 F.2d 161 (9th Cir. 1990)

§ 727(d. Revocation proper even though discharge had not yet been formally entered.

In re Cox, 904 F.2d 1399 (9th Cir. 1990)

727(a)(3). Husband and wife have shared duty to maintain records, but court may

consider whether spouse had a right to rely on husband’s or wife’s bookkeeping.

In re Stevens, 107 B.R. 702 (9th Cir. B.A.P. 1989)

Where discharge has not yet entered but 4004 period has run, complaint should be brought

under § 727(d).

In re Beugen, 99 B.R. 961 (9th Cir. B.A.P. 1989), aff’d, 930 F.2d 26 (9th Cir. 1991)

May not purchase claims for the purpose of objecting to discharge.

155

In re Adeeb, 787 F.2d 1339 (9th Cir. 1986)

§ 727(a)(2).

156