In this case, the bankruptcy court denied debtors’ discharge after debtors transferred property, without consideration, to close friends and relatives with the intent to hinder, delay or defraud creditors.

Here, debtors filed a Chapter 7 bankruptcy and a creditor filed an adversary complaint with the court seeking to deny debtors’ discharge.

The creditor’s complaint alleged that:

(1) debtors’ bankruptcy schedules filed with the court failed to disclose numerous transfers of assets to others; (2) debtors’ schedules constituted a false oath to the court; (3) debtors failed to keep pertinent records from which their financial condition could be ascertained; and (4) debtors failed to explain a loss of assets.

Title 11, United States Code, Section 727(a), provides, in pertinent part:

The court shall grant the debtor a discharge, unless . . . the debtor, with intent to hinder, delay, or defraud a creditor or an officer of the estate charged with custody of property under this title, has transferred, removed, destroyed, mutilated, or concealed, or has permitted to be transferred, removed, destroyed, mutilated, or concealed–

(A) property of the debtor, within one year before the date of the filing of petition; or

(B) property of the estate, after the date of the filing of the petition; [or] . . . the debtor has concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information, including books, documents, records, and papers, from which the debtor’s financial condition or business transactions might be ascertained . . . [or] the debtor knowingly and fraudulently, in connection with the case . . . made a false oath or account . . . [or] the debtor has failed to explain satisfactorily . . . any loss of assets or deficiency of assets to meet the debtor’s liabilities . . . .

The court found that within one year prior to bankruptcy, debtors transferred numerous items of property to close friends and relatives, without consideration, including, a Coachman camper trailer, a boat, motor & trailer, an all-terrain vehicle, firearms, two trucks and archery equipment.

In addition, debtors’ bankruptcy schedules indicated that they only had twenty-five dollars in their checking and savings accounts, when in fact, they had more than $2,200 in their accounts.

The court denied debtors’ discharge in bankruptcy due to their false schedules and fraudulent transfers of property.  In re Smith, 161 B.R. 989.

Author: Charles R. Harroun, Attorney at Law