San Francisco Attorney Michael Papuc represents Debtors and Creditors in Bankruptcy Proceedings seeking Denial of Discharge for False Statements under oath

by Michael Papuc

Attorney at Law

44 Montgomery St., Suite 2405

San Francisco, CA 94104

415-773-1755



San Francisco Attorney Michael Papuc has been practicing law in California since 1987. Michael Papuc represents debtors and creditors in bankruptcy matters, including adversarial proceedings seeking denial of discharge for false statements under oath

The statutory authority which would support an adversarial proceeding seeking denial of discharge in bankruptcy is 11 U.S.C., sec.1127 (a)(4), which provides in pertinent part as follows:

(a) The court shall grant the debtor a discharge, unless—
...
(4) the debtor knowingly and fraudulently, in or in connection with the case—
(A) made a false oath or account;
(B) presented or used a false claim;
(C) gave, offered, received, or attempted to obtain money, property, or advantage, or a promise of money, property, or advantage, for acting or forbearing to act; or
(D) withheld from an officer of the estate entitled to possession under this title, any recorded information, including books, documents, records, and papers, relating to the debtor’s property or financial affairs; ....

The term "in connection with the case" is very broad. Any false statement in the bankruptcy papers, at the meeting of creditors, in deposition, qualifies as being in connection with the case.


In order to deny a debtor’s discharge under section 1127 (a)(4), the plaintiff must prove by a preponderance of the evidence that the debtor made a false statement under penalty of perjury, that it was made knowingly and fraudulently, and that it was with respect to a material fact. Materiality is broadly interpreted under this statute:

"A false statement is material if it bears a relationship to the debtor’s business transactions or estate, or concerns the discovery of assets, business dealings, or the existence and disposition of the debtor’s property." (In re Wills, 243 B.R. 58, 62 (9th Cir. BAP 1999).)

The statute is intended to insure that "the trustee and creditors have accurate information without having to conduct costly investigations." (Cusano v. Klein, 264 F.3d 936, 946 (9th Cir. 2001).) The focus of the inquiry is not upon the value of the assets that are the subject of an omission or misrepresentation, but whether the false statement interferes with the trustee’s or creditors’ ability to fully investigate the debtor’s pre-bankruptcy financial condition or otherwise adversely affects the administration of the estate. (In re Wills, supra at 63.)

Although discharge provisions must be liberally construed in favor of the debtor and against the complaining party, that does not alter the preponderance of the evidence standard. "Rather, it has been held to mean that actual, rather than constructive, intent is required." (In re Khalil, CC-07-1164, 2007 WL 4302728, at *6 (9th Cir. BAP Nov. 28, 2007) For purposes of this statute, a debtor acts knowingly if he acts "deliberately and consciously." (Khalil, at *7.) A statement or omission is made fraudulently if the debtor knew it was false at the time it was made and he made the statement "with the intention and purpose of deceiving the creditors." (In re Roberts, 331 B.R. 876, 884 (9th Cir. BAP 2005), aff’d, 2007 WL 2089041 (9th Cir. 2007).) As is true of fraud in other contexts, "intent usually must be proven by circumstantial evidence or inferences drawn from the debtor’s course of conduct." (Khalil, at *9.) Although a pattern of recklessness alone will not suffice to establish fraud, recklessness combined with other circumstances (such as the "badges of fraud") can support an inference that the debtor acted knowingly and fraudulently. (Khalil, at *12.)

A discharge in bankruptcy is not a right. It is something which provides a debtor relief from debilitating debt, and provides the debtor with a fresh Fraud in the bankruptcy case will subject the debtor to denial of discharge, and very often criminal prosecution. The debtor must be very astute and careful with regard to every statement made in the bankruptcy papers, and all testimony provided. If the debtor does not know the answer to questions, he or she should say so, and undertake to find the best information possible to respond truthfully and accurately.