Lee v. Peeples

Case Type:
Case Status:
BAP No. UT-18-003 (10th Circuit, Jul 16,2018) Not Published
BAP for 10th Circuit affirmed defense verdict of bankruptcy court (D. Utah) in favor of debtor-defendant on creditors' 11 USC 727 and 523 claims. Creditors failed to prove elements of claims related to failure to retain financial records from unsuccessful small business, and debtors' failure to disclose extent of a used Barbie doll and DVD collection. Debtors' dire financial condition explained failure to keep records, and Barbie doll and DVD collection did not appear to have material value. Creditors failed to prove intent to deceive or intent to defraud.
Procedural context:
Bankruptcy court entered defense verdict in favor of debtor-defendant on creditors' 11 USC 727 and 523 claims. One of creditors appealed to BAP for 10th Circuit.
Husband and wife creditors rented second home to debtors and five young children. Debtors paid $3k security deposit and fourth consecutive $3k/month rent payments, but defaulted on next month's payment. Creditors entered into sale contract for debtors to buy house for $655k. Debtors failed to obtain financing and defaulted on contract. Creditors commenced eviction action and debtors moved out two days later. Creditors obtained default judgment for $48,665. Creditors pursued collection action, but debtors failed to appear at multiple hearings. Debtors' silver coin business was failing. Creditors filed suit claiming fraud. Debtors defaulted, and court entered judgment for $88,727. Husband debtor was hospitalized with heart condition and family's sole vehicle was repossessed. Debtors filed bankruptcy, claiming no personal income from 2012-2014, including no "net revenue" from several business ventures, and debtors did not file tax returns. Debtors failed to keep business records of online businesses. Creditors commenced 727 and 523 action against debtors. Debtors were unable to recall purpose of $29k cash withdrawal from bank account five years prior, but posited that funds were used to purchase inventory for business. Debtors failed to disclose any inventory of silver coins or income from disposition, and failed to schedule a personal Barbie doll collection with a mint condition FMV of $3,150, and personal goods such as DVDs, laptop, and household furnishings.
Michael, Karlin, Romero

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