Bankruptcy Court May Deny Discharge When Bankruptcy Petitioner Knowingly Submits Incomplete Schedules
Bankruptcy law imposes certain limitations on a debtor’s ability to obtain a discharge of the debtor’s debts. One limitation is the debtor’s obligation to accurately and completely disclose the debtor’s finances in the schedules that are required as part of any bankruptcy filing. When a debtor knowingly submits incomplete or otherwise inaccurate schedules, the court may deny a discharge.
These principles were illustrated in a recent Ninth Circuit Court of Appeals decision, In re Retz. Mr. Retz filed a bankruptcy petition after a dispute with a business partner exposed him to significant liability. The business partner filed suit to deny Retz’s discharge on several grounds, including an allegation that Retz’s bankruptcy schedules were false. The Bankruptcy Code allows the court to deny a discharge if the debtor knowingly and fraudulently makes a false oath or account. Retz conceded that he signed his bankruptcy schedules, under penalty of perjury, knowing that the schedules were incomplete. Retz’s schedules omitted assets and income.
Retz’s defense was that he signed the schedules in blank and thought that his attorneys would complete them. His attorneys denied this claim. The court found that whether or not Retz was following his attorneys’ advice, the signing of blank schedules under penalty of perjury was sufficient for the court to conclude that Retz knowingly made a false account with fraudulent intent. Accordingly, the Ninth Circuit affirmed the bankruptcy court’s order denying Retz a discharge in bankruptcy.