Massachusetts Bankruptcy What Not To Do!
In a case that came down from the Bankruptcy Court recently, Judge Hoffman’s decision should be a reminder to all Massachusetts bankruptcy petitioners that, first and foremost, you must be 100% honest on your Massachusetts bankruptcy petition and schedules. And, if the Trustee requests documents, or additional information, you must provide all reasonable information. If not, you are subject to a rejection of a discharge and perhaps much worse.
In the case of Worcester resident and Chapter 7 petitorner, David Fontaine, the Trustee in Bankruptcy brought an adversary proceeding, in the bankruptcy court. The essence of the case was that the Trustee did not believe Mr. Fontaine was being honest in his Petition and Schedules; that his that he concealed financial information, that he mislead the Trustee, and that he lied in his testimony at the time of the hearing.
Judge Hoffman pointed out that it is difficult to object to a debtor getting a “fresh start” because the bankruptcy laws put the burden of proof on the creditor, or, in this case, the Trustee. The judge clarified the three-part test to prove false oaths:
1. that the testimony (sworn on the written Petition and Schedules or oral at a hearing) was knowing and false;
2. that the false oath was in connection with the case; and
3. that it was related to a material fact in the case
In Mr. Fontaine’s case, the Court found that the Petition, Schedules and testimony were replete with false oaths. They included the fact that he omitted including the lawsuit he was a party to in which he recovered $15,000; he omitted selling real estate where he netted $14,014 and $1,544, both within a year of the filing; he listed only one business that he was associated with, when, in fact, he had been engaged in multiple businesses, included owing a hair salon, owning race horses, and owning a contracting company; and, he failed to include his wife’s income notwithstanding the fact that they lived together and were clearly a “household” under the bankruptcy laws.
Wherefore, Judge Hoffman found that there were sufficient false oaths with fraudulent intent and he denied Mr. Fontaine’s discharge. It is hard to know why Mr. Fontaine’s presented the Chapter 7 bankruptcy with these false statements. Did he simply lie and continue to lie? A competent Massachusetts bankruptcy attorney, if given the truth, could likely have counseled Mr. Fontaine to do some pre bankruptcy planning and resolved these simple issues that ultimately resulted in Mr. Fontaine losing his opportunity to discharge his debts and get a fresh start.
It may shed some light on the Fontaine discharge case to point out that there was another adversary proceeding worth noting. In one Adversary Proceeding, Anthony Barca sued Mr. Fontaine. Essentially, the Barca case was a civil matter in which Barca was saying that money owed to him, by Fontaine, was not dischargable in bankruptcy. That is, the bankruptcy laws exempted Barca’s claim. Judge Hoffman disagreed with Barca, saying that the civil claim was a simple landlord tenant matter and not subject to the strict, and very limited rules for nondischargability.
Four our followers information, there is a simple test for proving an otherwise dischargable debt is not dischargable:
1. The debtor made a false, or several false, representations;
2. The debtor intended to deceive his or her creditor;
3. The debtor intended that the creditor rely on his or her false statements;
4. The creditor actually did rely on those false statements;
5. The creditor was reasonable in his or her reliance; and
6. By relying on the false statements, the creditor has money damages
In that adversary proceeding, Mr. Barca, who had the burden of proof, was unable to prove that Mr. Fontaine made the false representations. Notwithstanding the finding in Mr. Fontaine’s favor, his business practices, which came out in that hearing, were perhaps not up to the highest standards. He was not an upstanding landlord, and it was clear the problems were significant.