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

Summarizing by Amir Shachmurove

In re Marcus-Rehtmeyer

The Defendant-Appellee, Marcus-Rehtmeyer, concealed assets and income in her State Court Citation hearing with sufficient intent to justify denial of the discharge as to the debt of Plaintiff-Appellants, her Judgment Creditors.
Procedural context:
An Illinois State Court entered judgment against the Defendant-Appellee. Plaintiff-Appellants issued a Citation to Discover Assets in accordance with Illinois law. The Appellee then filed a Chapter 7 Petition. Appellants objected to the discharge of their debt on the basis of concealment of assets and income in the State Court Citation. The Bankruptcy Court for the Northern District of Illinois denied the Objection. The District Court affirmed that denial. In this opinion the 7th Circuit concludes that the Appellee concealed assets with the requisite intent and therefore reverses.
Plaintiff-Appellants Mark Jacobs and Chivalry Consulting secured a Beach of Contract judgment in an Illinois Court against Defendant-Appellee Marcus-Rehtmeyer and the Appellants issued a Citation to Discovery Assets. At the Citation Hearing, Appellee testified concerning her income and ownership of assets, including property and stock. The Citation was continued several times before a Rule to Show Cause hearing was scheduled. That too was continued; but before a Rule could be issued the Appellee filed Chapter 7. The Appellants objected to the discharge of their debt and a trial was held. When the Bankruptcy Court denied the Objection the Appellants appealed to the District Court. When the District Court agreed with the Bankruptcy Court the Appellants appealed to the 7th Circuit. The 7th Circuit found that the misrepresentations, movement of assets, and failures to disclose by the Appellee had taken place while she was still under the auspices of the Citation - including an ongoing duty to refrain from violating its terms and to disclose all assets. The violation of the Citation was the predicate fraud the 7th Circuit considered to have been sufficient - and to have been executed with sufficient intent - to satisfy 727(a) and justify reversing the decision of the Bankruptcy and District Courts.
Wood, Rovner, Hamilton

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