Available at: https://digitalcommons.wayne.edu/cgi/viewcontent.cgi?article=1605&context=lawfrp
Abstract:
Individual debtors who file for bankruptcy protection under chapter 7 of the Bankruptcy Code1 are entitled to receive a discharge unless one of the grounds for denying a discharge set forth in § 727(a) is established. Section 727(a)(2) of the Code directs the court to deny a discharge if: (2) 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 the petition; or (B) property of the estate, after the date of the filing of the petition.2 For many years courts have applied the doctrine of “continuing concealment” to deny discharges to chapter 7 debtors who took an act to conceal property more than one year before the filing date and continued to reap the rewards of that concealment during the one-year period.3 In this article I suggest that the doctrine of “continuing concealment” is not justified by the language of § 727(a)(2) (or its predecessor provision in the Bankruptcy Act of 18984) and should be rejected. I will first set out the statutory history of § 727(a)(2), followed by a description of the case law interpreting the term “concealed,” and the development of the concept of “continuing concealment.” I will then discuss what I think is wrong with the doctrine of continuing concealment as applied to the discharge provision. There are four parts to this argument. First, I maintain that the definition of “conceal” does not include the types of transactions described as supporting continuing concealment. Second, the statute permits denial of discharge only if the debtor has concealed property of the debtor, yet the cases dealing with continuing concealment often do not involve concealment of property of the debtor. Third, the statutory limit on the time within which the debtor must have concealed property is not a statute of limitations, but an element of the act that bars discharge, and Congress never made the act a continuing one. Fourth, the inclusion of the word “concealed” in the context of the other prohibited acts in section 727(a)(2) makes clear that it refers to the debtor’s act of concealing property, not the property’s state of being concealed. This interpretation is bolstered by the inclusion of the one-year period applicable to those acts. Therefore, I conclude that the continuing concealment doctrine has no basis in the language or policy of the discharge provisions of the Code and should be jettisoned by the courts.
Commentary:
It is a nice piece of legal jujitsu how this article turns the requirement by the Supreme Court In City of Chicago v. Fulton for there to be an affirmative act by the creditor for a finding that it violated the automatic stay to also argue that "concealment" under 11 USC 727 also requires an affirmative act. Whether any courts will hold their nose over the stink of past behavoirs and grant discharges, seems unlikely.
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