Chlad v. Chapman

In 2013 Chlad and her husband, Vehovc, filed a joint Chapter 7 bankruptcy petition seeking to discharge about $5 million of debt. After Chlad and Vehovc filed financial disclosures, two creditors brought an adversary proceeding objecting to the discharge, alleging that the filings omitted information material to the debtors’ financial condition, 11 U.S.C. 727(a)(4). Chlad and Vehovc failed to disclose the existence of particular real estate, a significant creditor, bank accounts, a shareholder loan, certain sources of income, and an alternate first name used by Chlad. The bankruptcy court denied the discharge, finding that the omissions reflected material false statements made with fraudulent intent. The district court and the Seventh Circuit affirmed. The omissions and misstatements were material and reflected false statements made under oath that the debtors knew or should have known to be false; taken together, the omissions and misstatements demonstrated a reckless disregard for the truth, which was sufficient to support a finding of fraudulent intent necessary to deny discharge under section 727(a)(4). View "Chlad v. Chapman" on Justia Law