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The Security National Bank of Sioux City, IA v. Vera T. Welte Testamentary Trust

Summarizing by Amir Shachmurove


Case Type:
Case Status:
18-6006 (8th Circuit, Oct 29,2018) Published
US Trustee proved by a preponderance of evidence that debtors failed to have adequate records of business transactions under 11 USC 727(a)(3) and making it impossible to ascertain debtors' financial condition. US Trustee did not have to demonstrate intent, only that failure was to maintain "reasonable" records. Debtors records were inadequate to allow creditors to trace debtor's financial history, to ascertain debtors' financial condition, or to reconstruct debtors' transactions. Bankruptcy court did not err in finding that it could not reconstruct debtors' jewelery transactions.
Procedural context:
Trustee sued debtors to deny discharge; bankruptcy court (D. Minn.) entered judgment against debtor defendants. Debtors appealed to Eighth Circuit.
Husband and wife debtors filed bankruptcy. Debtors were trained and practiced as physicians and surgeons; husband also held law degree and Ph.D. Schedules showed debts in excess of $5 million, with joint monthly income of approximately $16,500. Largest debt was in excess of $4 million from judgment related to home construction. Prior to filing, husband purchased dozens of expensive watches, accruing debt of $390,700 to jeweler. Husband claimed jeweler would not provide paperwork with watches, and he would review watches sent, return some, and keep others. Debtor did not have paperwork for watches still in his possession. Documentary evidence indicated that Debtors received watches and a ring of various significant value, but the actual amount could not be reconstructed. Prior to filing, husband confessed judgment to jeweler in amount of $390,700. Prior to filing, husband returned 27 watches and ring to jeweler. The parties did not value the transaction, or the items returned. Watches returned did not match the watches listed in the invoices Debtors had kept. Debtors could not account for what happened to watches listed as paid for on invoices.
Schermer, Nail, Shodeen

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