破產呈請書須務求正確 否則申請可能被撤銷

Bankruptcy petitions must be accurate. If they are not accurate, discharge may be denied pursuant to Section 727 (a) (4) which states that a discharge will not be given to a debtor who ‘knowingly and fraudulently, in or in connection with the case- (A) made a false oath or account.’ Case law states further that the omission or misrepresentation must be “material” for discharge to be denied. Thus, the law requires the existence of malice on the part of debtor because the false oath must be “knowingly and fraudulently” made by debtor. What do you think of the following case? In this case, debtor was involved in a car accident which killed another person. Debtor did not disclose this accident in her bankruptcy petition. Decedent’s husband got a $1.0 million wrongful death judgment against debtor on May 24, 2006. Debtor filed for Chapter 7 relief on October 11, 2006, six months after that judgment was obtained. Debtor’s petition disclosed only a mortgage which she reaffirmed. Did it make any difference that a wrongful death claim is not dischargeable? It is arguable that the omission was harmless error because the claim was not dischargeable anyway so disclosing the claim would serve no purpose. Debtor received a discharge on February 16, 2006.

 However, during discovery conducted in connection with the trustee’s objection to the debtor’s homestead exemption, it was learned that the debtor actually misrepresented or omitted many material information in her bankruptcy petition, the schedules, the Statement of Financial affairs, and at his testimony at the 341 A creditor’s meeting. Debtor’s misrepresentations and omissions included the following:

1. Checking account balance was actually $8,551, not $387;

2. Schedule I did not disclose that she received alimony of more than $1,000 a month;

3. Schedule mistakenly disclosed monthly income from a trust at $1,083, instead of the correct $4,399;

4. Statement of Financial affairs incorrectly states her 2004 income at $22,500, instead of the correct $71,137;

5. Omission of the fact that debtor directed that distributions from the trust be made in her son’s name.

Hence, trustee filed a complaint seeking the revocation of debtor’s discharge on October 4, 2006. Debtor responded in her answer to the complaint that the errors were inadvertent and not intended to hinder, delay or defraud creditor. Since the substance of the misrepresentations and omissions clearly went to the heart of her financial disclosures, the court found that they were intentional, made ‘knowingly and fraudulently.’ The court found that the ‘sheer number and significance of the inaccuracies and omissions encompassing the false statements demonstrate, at the very least, a reckless indifference to the truth – the functional equivalent of fraud. The false statements infect every asset related schedule and statement in the bankruptcy petition so as to completely shed doubt on the debtor’s honesty.’ The debtor amended the schedules to correct the misstatements and omissions several months after she was told of the inaccuracies but these amendments did not change the court’s conclusion that the false statements were made knowingly and fraudulently.

Therefore, debtors must exert all efforts to be as accurate and complete as possible in disclosing financial information when preparing the bankruptcy petition. For instance, all assets here and abroad must be disclosed. This means that if you have real estate abroad, you must disclose it. Or, if you have bank accounts abroad, you must disclose them. If you have business abroad, you must also disclose it. Your lawyer will help you exempt and keep all your assets, including your assets abroad. Failure to disclose foreign assets may not only result in denial of your discharge, it may even result in jail time for debtor if a bankruptcy crime has been committed. So, if you have a 300 ft luxury yacht with your name on it parked beside the yacht of Michael Douglas in the Bahamas, you must disclose this asset in your bankruptcy. If you don’t, you are making a false material oath in bankruptcy which will result in denial of your discharge.