Debtor's Obligation to IRS Not Excepted from Discharge Despite Claim He Conveyed His Interest in Home to WifeIn re Petersen (N.D.Iowa 2004) Debtor transferred his interest in the couple's residence to his wife, yet continued to occupy and enjoy the benefits of ownership in the property. His right to occupy the property was not listed as an asset. The Bankruptcy court found no intent to deceive or conceal and no fraudulent intent in transferrring the interest. Accordingly, taxes were not excepted from discharge. ___________________ Expense for Cigarettes Not Grounds to Deny Chapter 13 Plan In re Woodman (1st Cir. 2004) Evergreen Credit Union, an undersecured creditor, appeals from the decision of the District Court upholding the Bankruptcy Court's confirmation of Debtor Clare A. Woodman's First Amended Chapter 13 Plan ("Plan"). Evergreen objected to confirmation of the Plan on the ground that it did not meet the requirement set forth in §1325(b) that Debtors devote all their "disposable income" to their plans for at least 3-years. In particular, Evergreen claimed that Woodman's monthly purchases of cigarettes, amounting to $136.00, were not "reasonably necessary" expenses within the meaning of §1325(b)(2)(A) and argued that §1325(b) required the exclusion of Woodman's cigarette expenditures from the calculation of her reasonably necessary expenses, thereby increasing her projected disposable income and consequently the amount that she would be required to pay each month into the Plan. The Bankruptcy Court, in a thoughtful rescript, overruled Evergreen's objection to confirmation. SEE In re Woodman, 287 B.R. 589, 596 (Bankr. D. Me. 2003). Evergreen appealed and the District Court affirmed, as did the Appellate Court, adhering to the long-standing rule that arguments not squarely presented below may not be advanced for the first time on appeal. (Ed. Note: in this opinion the 1st Cir. did not address the issue of cigarette expense on the merits, but held that the issue was forfeit because it was not properly raised at the District Court level. However, the Appellate Court did appear to acknowledge that a Debtor in a Chapter 13 could include in the budget "basic needs including a reasonable cushion for recreation and exigencies.") ______________________ Debtor "Forgets" to Disclose Interest in Corporations In re Moschella (Bankr. N.D. Tex. 2004) Six or more careless mistakes in a consumer Debtor's Schedules will generally warrant denial of discharge under §727. Since the Court believes that many Schedules contain such errors, the Court expects Trustees and the UST to be much more active in policing the issuance of discharges. The UST complained of the omission from the Debtor’s Schedules of certain real estate, a GMC Yukon, and a Ford truck (the lien on which Debtor reaffirmed), as well as equity interests in at least 8 corporations. Among misstatements in the Statement of Affairs were the Debtor's income, equity interests and positions as an Officer and Director in the 8 or more corporations. There can be no question about the materiality of these omissions. The judicial standard of materiality is an easy one to meet. As the Court of Appeals for the Fifth Circuit stated in Beaubouef (966 F.2d at 178), quoting COLLIER ON BANKRUPTCY: The subject matter of a false oath 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 property. Value is immaterial. Though a failure to give proper value to an item may itself constitute a false statement, and the Debtor’s views of value are to be scrutinized critically (Mitchell, slip. op. at 3), the fact that the omission was of an asset without value does not make the omission "immaterial." ______________________ Failure to Maintain Adequate Records Results in Denial of Discharge In re Schifano (1st Cir. 2004) Because the Debtor is often the gatekeeper to any incriminating evidence, the Bankruptcy Code will avoid a discharge if a Debtor fails to maintain adequate records to reasonably ascertain his financial condition, according to §727(a)(3). Complete disclosure is in every case a condition precedent to the granting of a discharge, and if such a disclosure is not possible without the keeping of books or records then the absence of those records amounts to grounds for denial of discharge. A Debtor's decision to not maintain a bank acocunt to avoid creditor action can also constitute grounds for denial of discharge for failure to maintian records.