Coastal Capital, LLC v. Savage
- Case Type:
- Consumer
- Case Status:
- Affirmed
- Citation:
- 25-1249 (1st Circuit, Feb 27,2026) Published
- Tag(s):
-
- Ruling:
- A bankruptcy court can refuse to grant a debtor a discharge if the debtor cannot explain the loss or deficiency of assets that could have been used to meet the debtor's liabilities. 11 U.S.C. § 727(a)(5). The statutory language does not require that the missing assets be substantial or in an amount sufficient to satisfy the debtor's liabilities. Bankruptcy courts, however, have the discretion to consider the materiality of the missing assets in its determination of whether the objecting creditor has overcome the initial presumption that a debtor is entitled to a fresh start.
- Procedural context:
- Following the conversion of the debtors' case from Chapter 11 to Chapter 7, a creditor commenced an adversary proceeding to prohibit the debtors from obtaining a discharge. After cross motions for summary judgment and a bench trial, the bankruptcy court ruled that 11 U.S.C. § 727(a)(5) precluded the debtors from obtaining a discharge.
The debtors appealed to the district court, which affirmed. The debtors then appealed to the Court of Appeals.
- Facts:
- Before the debtors, Steven T. and Virginia A. Savage, filed their bankruptcy petition, they owned and operated a business (Sky-Skan Incorporated) that designed, installed, and maintained digital equipment used in planetariums. Sky-Skan operated out of an office condominium owned by Steven T. Savage.
Steven was Sky-Skan's president and sole shareholder. Virginia Save was Sky-Skan's vice president and bookkeeper.
Sky-Skan experienced financial difficulties in 2017. The Savages used their own funds and credit cards to cover Sky-Skan's operating expenses. However, Sky-Skan defaulted on a $900,000 secured line of credit, which led to litigation in state court followed by litigation in bankruptcy court when Sky-Skan sought Chapter 11 relief.
In its bankruptcy, Sky-Skan filed a statement of financial affairs ("SOFA") and schedules that Steven Savage signed. Sky-Skan's SOFA disclosed that Sky-Skan had disbursed $704,075 to the Savages in the year preceding bankruptcy for "expense reimbursement for use of credit cards, travel expenses, rent and repayment of personal loans."
The Savages then filed their own Chapter 11 petition (which was later converted to Chapter 7). The Savages filed their own SOFA and schedules. The documents filed by the Savages in their case reported no income from employment or from operating a business in the three years leading up to the date on which the Savages filed their Chapter 11 petition.
The creditor then commenced an adversary proceeding against the Savages to object to the discharge of the Savages.
- Judge(s):
- Gelpí, Thompson, and Montecalvo, Circuit Judges
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