Summary:
Uncontested evidence showed that the Debtor had failed to disclose the transfer of real property to her brother 15 days prior to the filing of her bankruptcy as well as the omission of ownership interests in an investment club and several bank accounts. While it was determined in a separate action that the transfer of the real property was subject to a pre-existing lien and had no equity, the Bankruptcy Administrator nonetheless sought denial of the Debtor’s discharge under both 11 U.S.C. §§ 727(a)(2)(A) and 727(a)(4)(a).
Denial of a Debtor’s discharge pursuant to § 727(a)(2)(A) requires a showing that that the debtor:
(1) transferred or concealed,
(2) his property,
(3) with the intent to hinder, delay or defraud a creditor,
(4) within one year before filing the petition.
Intent is evidenced through the “badges of fraud”, which include:
• family, friendship or insider relationships between the parties;
• the debtor’s retention of possession, benefit or use of the property in question;
• the lack of or inadequacy of consideration for the transfer;
• the debtor’s financial condition before and after the transfer;
• the existence or cumulative effect of the pattern or series of transactions or course of conduct after the incurring of debt, onset of financial difficulties, or pendency or threat of suits by creditors;
• the general chronology of the events and transactions under inquiry;
• the debtor’s attempt to keep the transfer a secret; and
• the proximity of the transfer to the debtor’s filing bankruptcy.
11 U.S.C. § 727(a)(4)(a) directs that a Debtor’s discharge should be denied if “the debtor knowingly and fraudulently, in or in connection with the case . . . made a false oath or account” upon a showing that:
(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 materially to the bankruptcy case.
Following a thorough review of similar cases in the Middle District of North Carolina and of the evidence in this case, the court found that there were multiple bases for deny the debtor’s discharge in this case.
For a copy of the opinion, please see:
Jeffries- Denial of Discharge
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