NOT EVERY OMISSION IN BANKRUPTCY PETITION AMOUNTS TO FALSE OATH

Section 727(a)(4)(A) provides that the court shall grant the debtor a discharge unless “the debtor knowingly and fraudulently, in or in connection with case made a false oath or account.” Because a debtor signs the petition and schedules under penalty of perjury, a false statement or omission of information from the debtor’s petition is a false oath within the meaning of 727(a)(4)(A). For example, debtor owns a 60ft yacht docked in the Bahamas. The boat is fully paid for. In his bankruptcy petition, debtor does not disclose the existence of the yacht. Instead, he states in the bankruptcy petition that he owns a 4 foot rubber boat with a miniature motor powered by two double-A energizer batteries. Is this a false oath? Clearly, it is and that omission is knowing and fraudulent. Consequently, debtor is not entitled to a discharge.

 In Re Artsein, the Chapter 7 debtor transferred title to his Ford Escape to his wife. His Statement of Financial Affairs did not disclose this transfer. The plaintiff asked the court to deny the debtor’s discharge pursuant to Section 727(a)(2) for making a prepetition transfer intending to harm, delay, or defraud creditors, and pursuant to Section 727(a)(4)(A) for making a false oath. The plaintiff also asserted that the debtor’s discharge should be denied because he failed to schedule a transfer of his home from himself and his wife as joint tenants to a family trust. The court ruled for the debtor. The court noted that the plaintiff did not dispute the debtor’s testimony that he transferred the vehicle to his wife because it had always been her vehicle and that she used it exclusively. Further, the court gave credence to the debtor’s testimony that he told his prior attorney about the vehicle and that the attorney should have properly scheduled the transfer. Regarding the transfer of the debtor’s home, the court noted that the debtor disclosed the property and the mortgage against it on schedule A and D. “The existence of his home was not concealed. The court declines to find that the debtor intended to defraud his creditors. The bankruptcy forms require that he report it at more than one place. His failure to disclose it in the Statement of Financial Affairs when it has been disclosed in two other places, however, does not amount to fraud or show that he knowingly concealed the home’s existence. In addition, the property is in foreclosure, making it impossible to effectively conceal it from either the bankruptcy trustee or creditors. The court notes that a different creditor sought and was granted relief from the automatic stay as to the home,” the court said.

Another reason why an omission is a false oath is because testimony given by a debtor at the 341a meeting of creditors is given under oath. At this meeting of creditors, the debtor is first sworn in by the trustee. After the debtor is sworn in, the trustee proceeds to ask the debtor questions. One of the questions asked of debtor is whether or not he read the petition before signing it. He is then asked if he has any corrections to be made today, and if there are any errors or omissions, now is the time to make those corrections in the recorded testimony. So, if the debtor answers affirmatively to the first question, and negatively to the succeeding question, then in our earlier example, where debtor actually owns a yacht docked in the Bahamas which is not disclosed anywhere in his petition, debtor perjured himself and made a false oath and should not be entitled to a discharge.

“The subject matter of a false oath is material and warrants denial of discharge if it is related to the debtor’s business transactions, or it concerns the discovery of assets, business dealings or the existence or disposition of the debtor’s property.” Thus an omission regarding business matters is a different issue altogether. The standard of scrutiny would be a lot stricter.