Skavysh v. Katsman (In re Katsman)

Skavysh v. Katsman (In re Katsman), No. 13-C-1881 (7th Cir. Sept. 23, 2014)
The Court of Appeals affirmed the District Court's holding, affirming that a Chapter 7 Debtor is not intitled to a discharge under Section 727(a)(4)(A), even in a "No-Asset" case, when she intentionally omits known creditors for any deceptive purpose.
Procedural context:
Bankruptcy Court rejected creditor's objection to Debtor's discharge pursuant to Section 727(a)(4)(A), holding that intentionally omitting "family and friend" creditors for the asserted purpose of paying them later, rather than for personal gain purposes, was not "fraudulently" making a "false oath or account" in connection with the case. The District Court reversed and held objection to Debtor's discharge was valid. Debtor appealed.
Ms. Katsman (Debtor) filed for Chapter 7 relief and submitted a Schedule F of unsecured creditors, based upon which the trustee reported that no assets were available for creditors. Debtor's ex-husband's son, Skavysh, objected to Debtor's discharge because she intentionally omitted several creditors from Schedule F, one of which was her ex-husband, Skavysh. The other omitted creditors were friends and family who loaned her money during her divorce from Skavysh. Debtor admitted at trial that the omissions were intentional, but claimed that she omitted them because she intended to repay them, and she (mistakenly) believed that listing them would prohibit her from paying them. The District Court overruled the objection, holding that that intentional omissions, even for a "good" purposes, was still fraudulent. The Court of Appeals affirmed, holding that Debtor's motive for intentionally omitting anything more than de mimimis debt was irrelevant, because the requisite "deception" existed regardless of profit motive. The Court of Appeals opined that the Bankruptcy Court apparently "missed the pattern" of deception that seemed to belie Debtor's "good intentions" defense. That "pattern" included Debtor's other questionable omissions, which included alimony payments that she received from her ex and significant property assets that she still owned jointly with her ex. As a result of this "pattern" of omissions, and because Debtor's counsel could have told her, if she had asked, that listing creditors does not alter one's voluntary payment options, the Court of Appeals questioned Debtor's veracity and found, apparently also finding clear error in the Bankrutpcy court's factfinding function, that Debtor's "many false statements bespeak a pattern of reckless indifference to the truth, implying fraudulent intent." The Court of Appeals also held that the Bankruptcy Court applied the wrong legal standard in that "fraudulently ... mak[king] a false oath or account" did not require an intent for pecuniary benefit where any intent to deceive or even a "reckless indifference to the truth" (e.g., erroneous intent to prefer family/friend creditors over others without seeking legal counsel) suffices to defeat the Debtor's discharge.
Posner, Rovner and Williams, Circuit Judges.

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