California Court Bars Bankruptcy Discharge Due to Lack of Financial Records

Bankruptcy proceedings typically involve a substantial number of documents. Specifically, debtors must provide all available information that demonstrates their financial status and transactions. If a debtor fails to provide such information and does not have a valid reason for the lack of such documentation, their claim may be dismissed. This was demonstrated in a recent opinion issued in a California bankruptcy case, in which the court affirmed the dismissal of the debtor’s claim. If you have debts you are struggling to pay, you may be able to seek reprieve via bankruptcy, and it is smart to speak to a knowledgeable California bankruptcy lawyer regarding what measures you may be able to take to regain financial security.

Procedural History of the Case

It is reported that the debtor filed a bankruptcy petition. The bankruptcy court ultimately dismissed his petition on the grounds that he lacked adequate records demonstrating his business transactions or financial condition. Specifically, he neglected to provide documents through which the court could define his ownership interest in a cattle ranch and instead provided bank borrowing certificates that were rife with inconsistencies. Thus, the court barred his discharge.  The debtor appealed. Upon review, the district court affirmed the bankruptcy court decision. The debtor then filed a second appeal to the United States Court of Appeals, Ninth Circuit.

Dismissal of a Bankruptcy Case Due to Lack of Information

Section 11 U.S.C. 727(a)(3) of the bankruptcy code prohibits a debtor’s discharge if they have failed to preserve any recorded information from which their business dealings may be ascertained unless their actions or failure to act was justified under the circumstances. In other words, a debtor must prevent adequate written evidence to allow their creditors to reasonably determine their present financial condition and to trace their business transactions for a reasonable period in the past.

In the subject case, the bankruptcy court found that the debtor failed to meet his burden of proof under section 727(a)(3). When reviewing a discharge denial under section 727(a)(3), an appellate court reviews that bankruptcy court’s determinations for clear error, the rules selected under section 727(a)(3) are reviewed de novo, as are the application of the facts to those rules. In the subject case, the court found that the bankruptcy court’s finding that the debtor failed to keep records was not clearly erroneous. Further, its determination that the debtor did not justify his lack of records was accurate. Finally, the bankruptcy court considered all relevant factors. Thus, the court affirmed its ruling.

Speak to an Experienced Bankruptcy Attorney

Bankruptcy provides many people with necessary relief from their debts, but debtors must be honest and straightforward throughout the process, otherwise, their claims may be dismissed.  If you have questions regarding whether you may be eligible for bankruptcy, you should meet with an attorney as soon as possible. Matthew D. Roy is an experienced California bankruptcy lawyer who can assess your situation and advise you of what relief may be available. You can reach Mr. Roy via the form online or by calling (916) 361-6028 to set up a conference.