Minnesota Bankruptcy Case: Debtor Will Get a Discharge

Minnesota Bankruptcy Case: If Omissions are Not Material or Not The Result of Fraudulent Intent, Debtor Will Get a Discharge

The following is a summary of a Minnesota bankruptcy case or a case relevant to Minnesota bankruptcy law.

Minnesota Bankruptcy Case:

Bernhardt v. Radloff (In re Radloff), 418 B.R. 316 (Bankr. D. Minn. 10/8/09) (Kishel, J.).

Case Summary:

If Omissions are Not Material or Not The Result of Fraudulent Intent, Debtor Will Get a Discharge

Bernhardt, a creditor, brought an adversary proceeding against Radloff, the debtor, and the court treated it as one a complaint seeking to except his debt to her from his discharge and seeking denial of his general discharge under 11 U.S.C. § 727(a)(4)(A). First, although there were some discrepancies on Radloff’s petition, schedules and means test regarding his income, the court found the variations not to have been material. Radloff relied on his attorney to complete the means test form and there was no evidence of fraudulent intent, even though the calculation was not as thorough as it should have been. Second, although the debtor failed to include his wife’s income on the Schedule I, Bernhardt failed to prove that it was done with fraudulent intent. Rather, Radloff’s attorney believed that he did not need to include a non-filing spouse’s income on the Schedule I and the print on the form was hard to read. Third, Bernhardt alleged that Radloff failed to disclose business entities, but the court found no evidence of that, and although the debtor should have checked the box that most of his debt was businessrelated, it was not a material error.

Fourth, Bernhardt was wrong in believing that Radloff had failed to disclose real estate. The real estate was owned solely by his wife. Fifth, there were a number of technical “errors” on the schedules, but they were not significant or material. For instance, Radloff did not list bank account numbers but the court observed that with electronic filing, they are to be redacted anyway. Sixth, Radloff’s scheduling of assets was not sufficiently itemized but was not materially false. Seventh, Bernhardt alleged but failed to prove that Radloff had an unscheduled self-employment tax liability. Eighth, Bernhardt was correct that Radloff should have listed the lawsuit she had been pursuing against him before he filed his petition, but Radloff had told his attorney about the state court proceedings and the omission was his attorney’s fault. Ninth, Bernhardt was correct that Radloff should have filed an amended Form 6, “Statistical Summary of Certain Liabilities and Related Data (28 U.S.C. § 159),” but the changes were not truly material and the purpose of the statement is purely administrative. Because Bernhardt had not sustained her burden, the court held that there was no basis to deny the debtor’s discharge under 11 U.S.C. § 727(a)(4).

Credit: The preceding was a summary of a case relevant to Minnesota bankruptcy law. The case summary was prepared by the U.S. Bankruptcy Court through Judge Robert J. Kressel & attorney Faye Knowles.