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In re Carol Engen

Summarizing by Bradley Pearce

Robin Singh Educational Services, Inc. v. McCarthy (In re McCarthy)

Robin Singh Educational Services, Inc. v. McCarthy (In re McCarthy), BAP Case No, MB 12-059 (B.A.P. 1st Cir. Mar. 22, 2013)
Affirming the Bankruptcy court’s denial of discharge pursuant to Section 727(a)(4), agreeing with the bankruptcy court that the debtor’s failure to schedule all of his assets was an intentionally fraudulent act and not the result of the debtor’s self-proclaimed attention deficit hyperactivity disorder (“ADHD”).
Procedural context:
First Circuit BAP affirmed US Bankruptcy Court, District of Massachusetts’ order denying debtor’s discharge under Section 727(a)(4) after 2-day trial and four amendments to the debtor’s schedules that each failed to completely disclose all assets.
Chapter 13 debtor disclosed in his initial schedules that he had only one bank account containing only $218 as of the petition date. After the case converted to a chapter 7, Robin Singh Educational Services, Inc. (“RSES”), a state court judgment creditor, held a 2004 examination of the debtor in which the debtor acknowledged that routinely he destroyed bank statements. RSES subpoenaed the debtor’s bank records and learned that the debtor had more than the lone account. The debtor then filed amended schedules that again failed to fully disclose the existence of the debtor’s bank accounts. RSES commenced an adversary proceeding seeking, among other things, a denial of discharge under Section 727(a)(4). During the trial the debtor again filed further amended schedules that did not fully disclose the debtor’s bank accounts. In the post-trial period, the debtor again filed amended, but incomplete, schedules. The bankruptcy court entered judgment against the debtor denying his discharge under Sections 727(a)(2)(B), (a)(3) and (a)(4). The court specifically dismissed the debtor’s contention that his ADHD obviated any fraudulent intent with respect to the deficiencies in his schedules, finding that the debtor was no so impaired that he could not have had the requisite fraudulent intent. The court found the debtor had omitted or undervalued numerous assets, that he failed to correct by amendment. The court also found that there were numerous discrepancies in the debtor’s testimony regarding his assets. The evidence produced at trial shows that the debtor opened bank accounts within weeks of the petition date, failed to report deposits into those accounts, and failed to reveal that he had opened and funded an account in his father’s name less than two months before the petition date. The court was unconvinced by the debtor’s ADHD defense, noting that the debtor was not diagnosed prior to the bankruptcy and had sufficient capacity to devise a system to shield his assets. The court found that the debtor’s professed memory and ADHD issues seemed to arise only when they excused the debtor’s conduct. The BAP affirmed the bankruptcy court’s findings of fact that the debtor had knowingly and fraudulently failed to disclose assets and that, taken in total, the debtor’s actions belied any claim that his ability to act with the requisite intent was excused by his ADHD. While an honest confusion or lack of understanding may weigh against an inference of fraudulent intent, the BAP agreed with the bankruptcy court that the debtor’s claims of innocence were not credible and belied by the debtor’s conduct.
Haines, Tester and Godoy

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