NOT EVERY OMISSION IN BANKRUPTCY PETITION AMOUNTS TO FALSE OATH PART 1

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.