FALSE OATH MAY BE GROUND FOR DENIAL OF BK DISCHARGE

Section 727(a)(4) of the bankruptcy code states that the court shall not give a discharge if “the debtor knowingly and fraudulently, in or in connection with the case – made a false oath or account.” Examples of debtor statements that may constitute a false oath: 1. Debtor says that he is not expecting a tax refund. In fact, a $12,000 tax refund is on the way. 2. Debtor says that he doesn’t own real estate. In fact, he is the true owner of a rental property out of state but title is held by his son for him. 3. Debtor says that he only has $2,000 in the bank. In fact, he has $50,000 in a savings account in the name of his friend who holds the money for him. These are all false oaths that support a denial of bankruptcy discharge, and will lead to criminal prosecution of debtor for bankruptcy fraud.

 In Re De Martino, debtor filed for Chapter 7 relief January 2009. He listed himself as a self-employed contractor & handyman. He did not schedule as assets two mechanic’s liens he held in his name or one that he held in the name of a wholly owned corporation. He also failed to schedule the claims underlying those liens. The liens were for a total amount of $307,000. 4 months before his bankruptcy filing, debtor was sued by the owner of a company who alleged that debtor worked for him as a management consultant and that debtor was paid $1,240 per week from May 2007 through July 2008, and that debtor had transferred these payments to his wife. Neither the income nor the transfers were disclosed in debtor’s bankruptcy schedules. Based on these facts, the trustee asked the court to deny the debtor’s discharge. The court found that “The debtor’s affirmative denial of any accounts receivable or liquidated debts owed to him and negation of any executor contracts in his schedules were false oaths,” “In addition, the debtor’s nondisclosures of asserted related liens on his schedules and the State Court Action on his statement of financial affairs also constituted false oaths.” said the court. The debtor admitted that his schedules contained false statements and omissions, but he argued that the plaintiff did not prove that he had fraudulent intent. It’s pretty hard to sell this argument when debtor denied that he had any receivables when he in fact had $307,000 of mechanic liens. You may forget that someone owes you $30, but not $307,000! This argument is similar to Tiger’s sex rehab excuse for his philandering which he kept a secret for as long as possible but when it leaked out, he expected that sex rehab therapy would absolve him of his sins against his wife and his marriage. If his wife had bought that excuse and given Tiger another chance, she would not have been fit to be his wife in the first place. Only a woman with low self esteem would buy the argument that philandering is a disease curable by sex rehab.

Naturally, the court did not buy debtor’s argument that plaintiff did not prove that he had fraudulent intent, stating that “the indicia of fraudulent intent surrounding the debtor’s false statement and omissions are manifold and powerful.” The court denied the debtor’s discharge pursuant to Section 727(a)(4), the false oath provision of the bankruptcy code, and 727(a)(3). 727 (a) (3) denies a discharge to the debtor “who has concealed, destroyed, mutilated, falsified , or failed to keep or preserve any recorded information, including books, documents, records, and papers, from which the debtor’s financial condition or business transactions might be ascertained, unless such act or failure to act was justified under all of the circumstances of the case;”. The court found that debtor failed to keep or preserve books and records, and that such failure made it impossible to determine the debtor’s financial condition or business transactions. “This bankruptcy case is marked by a virtual absence of recorded information,” the court said. DISCHARGE DENIED.

 Lawrence Bautista Yang is a graduate of Georgetown University Law Center and has been in law practice for thirty years. He specializes in bankruptcy, business and civil litigation and has handled more than four thousand successful bankruptcy cases in California. He speaks Mandarin and Fujien and looks forward to discussing your case with you personally. Please call (626) 284-1142 for an appointment at 1000 S Fremont Ave Bldg A-1 Suite 1125 Unit 58 Alhambra, CA 91803.