ACCOUNTANT WITH MASTER’S DEGREE DENIED DISCHARGE

If you are a debtor with a master’s degree in accounting, you better make sure that your bankruptcy petition is 100% accurate on date of filing. In Re Gorman, the chapter 7 debtor had a master’s degree in accounting. He worked as a controller for 4 different companies. Moreover, debtor owned and operated a professional services company that provided accounting and tax services to the public. In all of these positions debtor either prepared financial forms and reports, or arranged for their preparation. In addition to his work in accounting and finance, debtor was engaged in numerous business ventures. However, he failed to disclose that he owned equity interests in at least 10 closely held corporations in the statement of financial affairs of his bankruptcy petition when he filed his chapter 7 case. Instead, his statement of financial affairs debtor said he had no “stock and interests in incorporated and unincorporated businesses.” He did disclose his interest in one defunct entity which he valued at zero.

 Debtor blamed his high level of accounting background as the culprit for failing to disclose his equity interests in ten corporations. He said that his accounting background turned out to be more of a hindrance than a help when it came to preparing his bankruptcy schedules. As an accountant, he said, he was trained to recognize assets only if they have value. He also said he was under great stress when he filled out his bankruptcy schedules because he was the primary caregiver for his parents, both of whom were terminally ill. The usual, blame it on the parents excuse.

Debtor argued that he cured any deficiencies in his schedules and statements by making a full disclosure at the 341a meeting of creditors and providing tax returns to the trustee. Although he had the right to make amendments to his bankruptcy petition which would date back to the date of filing to flesh out his full disclosure at the 341a meeting, debtor apparently did not do so. I can only surmise that debtor did not know about his right to amend the petition because he might have been representing himself without counsel. If he made the amendments soon after his testimony at the 341a, there probably would not have been any problem.

The court denied the debtor’s discharge pursuant to Section 727(a)(4) which states that the court shall grant debtor a discharge unless… “The debtor knowingly and fraudulently, in or in connection with the case, (a)made a false oath or account; (b)presented or used a false claim; (c)gave, offered, received, or attempted to obtain money, property, or advantage, for acting or forbearing to act; or (d)withheld from an officer of the estate entitled to possession under this title, any recorded information, including books, documents, records, and papers, relating to the debtor’s property or financial affairs.”

 “The court finds that the debtor knowingly and fraudulently made false oaths on his Schedules and statement of financial affairs by failing to disclose his interests and positions in the operating and non-operating entities. In the face of clear and u nambiguous directions on the Schedules and SOFA calling for disclosure of the identities of his stock ownership in corporations, the debtor failed to disclose the identity of several corporations in which he had an interest as of the petition date. I find not credible the debtor’s testimony that, by virtue of his training as an accountant and the alleged lack of value of his interests in the omitted entities, he did not appreciate the need to disclose these entities in his schedules,” the court said. Debtor then argued the Tiger Woods excuse. Debtor said that his pre-occupation with sex had led him to adultery and fornication causing him to completely forget about his equity interests in the 10 corporations. He said that he was going through sex rehabilitation but the court nevertheless denied discharge. “If Tiger’s wife divorced him, why should this court give you a discharge?” the court said.

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.