In a case handed down by the First Circuit Court of Appeals earlier this month, the Court stated that a bankruptcy debtor who was denied a discharge was valid because the debtor “intentionally and fraudulently omitted” and undervalued assets from his Massachusetts bankruptcy petition. The case, called In Re: Sullivan, Brian J., and published by Judge Votolato, was appealed from a decision by Bankruptcy Judge Feeney.
The assets were as follows:
A Rolex watch, which the debtor wore to the 341 Creditors Hearing, was not listed in the Petition or Schedules. The debtor later argued that he was not in any way intentionally or fraudulently misleading the Court, it was simply inadvertence. He also argued that he thought it had not value. The Court did not believe him, and the Appeals Court affirmed Judge Feeney’s decision saying that there was no clear evidence of the Judge’s finding.
Second, a bank account with $1,800 in it was presented as a bank account with $300 in it. The debtor argued that there was a difference between the date of signing and the date his attorney filed the Petition. This likely happens often; a paycheck gets deposited between those two dates, for example, and is rationally explained. However, the Court found that this debtor was “clearly inconsistent” with his explanations. The Court found him to be lying considering his signed Petition to be a false oath. The Appeals Court generally not likely to overturn such a finding by the judge that sits there, watching the debtor answer questions and listening to the answers.
Third, a motor vehicle that the debtor owned the Court found to be undervalued. The Chevelle necessitated $25,000 in upgrades, but was valued at $9,500 on the Petition. Apparently the debtor’s parents paid for the upgrades. The debtor admitted that the vehicle had appreciated in value since signing the Petition. It is not clear to me from reading the Court’s decision as to what happened here. But to some extent this sounds very fishy. While many of our Massachusetts bankruptcy clients are helped by their family, with childcare, regular financial gifts, and even vehicles, there are very few (in fact I don’t recall any) where $25,000 was paid for upgrading a vehicle. Further, none of our clients’ vehicles appreciate in value. The Bankruptcy judge found that the debtor “intentionally undervalued” the vehicle and did not believe the debtor’s testimony, and the Appeals Court confirmed.
In a blog article from our bankruptcy blog, http://www.bostonbankruptcylawyerblog.com/,that we published on April 29, 2010, titled Bankruptcy Law Update, we noted that a debtor lost his rights to a discharge after he, along with his bankruptcy lawyer, mislead the Bankruptcy Truste, regarding the characterization of his divorce settlement.
There is a very simple lesson to these cases: tell the truth; tell only the truth. Many times telling the truth to your Massachusetts bankruptcy lawyer will enable him or her to work with you to plan your Petition and Schedules. Sometimes it means using Chapter 13 and not 7. Sometimes it means waiting to file until after a gift date has cleared. Sometimes it means filing sooner because of an expected event such as a marriage, or later after a child is born. Competent Massachusetts bankruptcy lawyers work with you to make a plan. Don’t get caught filing a false Petition, get professional assistance.