McDermott v. Swanson (In re Swanson)

McDermott v. Swanson (In re Swanson), Case No. 12-6028 (8th Cir. BAP Aug. 17, 2012).
REVERSING and REMANDING the Bankruptcy Court decision, the 8th Circuit BAP found that although the failure to produce adequate financial records shifts the burden to the debtor to demonstrate a justification for their inadequacy, a debtor's failure to meet this burden does not justify a denial of a discharge pursuant to 11 USC s 727(a) as a ruling on the pleadings under FRBP 7012 and FRCP 12(c).
Procedural context:
Appeal from Bankruptcy Court for the District of Minnesota, granting Trustee's motion on the pleadings to deny debtor's Chapter 7 discharge.
The US Trustee believed that the Debtor may have profited from a Ponzi scheme (the "MPS Ponzi Scheme") in the amount of $174,500. The US Trustee requested records from the debtor regarding any and all documents related to the MPS Ponzi scheme, but the Debtor failed to produce any documents. In response to the US Trustee's complaint regarding denial of a discharge in the amount of $174,500 related to the MPS Ponzi scheme, the Debtor responded that he had only received $15,000 from the ponzi scheme. The Trustee moved to deny the Debtor's discharge based on the Debtor's failure to produce records pursuant to FRBP 8012, FRCP 12(c) and 11 USC section 727(a)(3).
Schermer, Venters, and Nail. Authored by Venters.

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