In a case involving multiple corporations and transfers back and forth from the Debtors’ household bank accounts and corporate accounts, the Trustee and a major creditor sought a denial of discharge against the debtors under 11 U.S.C. § 727.
After reviewing and finding that the Debtors displayed several of the “badges of fraud”, see West v. Abdelaziz (In re Abdelaziz), 2012 Bankr. LEXIS 591, at *7-8 (Bankr. M.D.N.C. Feb. 1, 2012), the bankruptcy court nonetheless found that the Debtors also displayed several of the mitigating “badges of a desperate but well-intended debtor”, including:
(1) Evidence showing that the multiple corporations were established for legitimate purposes;
(2) Attempted negotiations prior to bankruptcy with creditors;
(3) Repayment of transfers from corporate accounts, particularly from liquidation of the individual Debtors’ personal property;
(4) Preferential payments were not evidence of an intent to hinder, delay or defraud other creditors;
(5) The Debtors lack of financial sophistication; and
(6) That the Debtors might, even though in one joint bankruptcy as husband and wife, not both share the culpability.… Read More