Summary:
Prior to the §341 Meeting of Creditors, the trustee was provided with an incomplete 2011 tax return, but, after insisting at the meeting, was given a complete return. This complete return disclosed that Belk was the owner of Independence Entertainment, L.L.C., an entity with annual revenues of more than $200,000, but which was not listed in Belk’s petition. The Trustee then discovered that Independence Entertainment had been administratively dissolved only three months before the filing of the bankruptcy and had transferred business assets to a third party. Only after all of these discoveries, did Belk then turn over additional business records. The Trustee sought denial of Belk’s discharge under 11 U.S.C. § 727(a)(4)(A) for making a false oath or account, § 727(a)(4)(D) for knowingly and fraudulently withholding records, and § 727(a)(5) for failing to explain the loss of assets.
Regarding false oaths or accounts under 11 U.S.C. § 727(a)(4)(A), the court held there all of the following required elements were present in Belk’s actions:
(1) the debtor made a statement under oath;
(2) the statement was false;
(3) the debtor knew the statement was false;
(4) the debtor made the statement with fraudulent intent; and
(5) the statement related to a material matter to the bankruptcy case.
Under § 727(a)(4)(D) in order to show that Belk knowingly and fraudulently withheld records, the Trustee bore the initial burden of showing that:
(1) the withholding of documents was done by the debtor or someone for whose conduct the debtor is legally responsible;
(2) was in connection with a case;
(3) was withheld from an officer of the estate entitled to possession;
(4) was done knowingly and fraudulently; and
(5) relates to the debtor’s property or financial affairs.
If these factors are shown, the Debtor may provide evidence to dissuade the court, but here Belk again failed.
Lastly, as to the denial of discharge under § 727(a)(5) for failing to explain the loss of assets, the Trustee must show that there are missing assets and then it is the burden of the debtor to explain the loss of such assets.
Commentary:
As in the Carolina Internet case, there does not appear to have been any referral of this matter to the United States Attorney for investigation of whether, in addition to a denial of discharge, Mr. Belk should be prosecuted for bankruptcy fraud.
For a copy of the opinion, please see:
Belk- Denial of Discharge
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