When Josh was asked, during a bankruptcy proceeding, whether he had ever been sued, he responded that he had not. In fact, he had once been sued for intentional infliction of emotional distress. That suit had been settled many years earlier and had no financial impact on Josh today. Josh’s debts were discharged in bankruptcy. Creditors want the discharge revoked because of Josh’s lie.
Should a discharge be revoked because of a lie made in court by the debtor that had no impact on the case?
In Dale Alleman v. Brett J. Kitson, 341 Fed. Appx. 234 (7 Cir. 2009) Brett J. Kitson and his wife, Courtney, had filed a joint bankruptcy petition in Bankruptcy Court for the Central District of Illinois. …show more content…
Kitson identified his corporation as BK Motorsports rather than its official name, Kitson Enterprises, and he failed to list the Employer Identification Number for that business. The bankruptcy court found that these misstatements and omissions were immaterial, and the court agreed. The court found that although there might be cases in which misstatement of a corporate name and omission of an EIN would hinder the court in its attempt to ascertain the extent of the debtor's assets, this was not such a case.
Mr. Alleman further pointed out that Mr. Kitson failed to disclose a $ 6,300 loan from his parents. The bankruptcy court concluded that omission of the parental loan was not material because Mr. Kitson's estate had no remaining assets with which to pay unsecured creditors, therefore, the omission had no effect on whether any of the unsecured creditors, including Mr. Alleman, would receive any distribution from the estate.
Finally, Mr. Alleman submitted that discharge was improper because Mr. Kitson represented in his bankruptcy statement that he had no record related to Kitson Enterprises. This representation was false. Mr.Kitson admitted at trial that he had possessed such records at the time of the bankruptcy filing and subsequently had disposed of them. The court found that this omission also was immaterial, because the bankruptcy court found that the corporation’s records were unrelated to Mr. Kitson’s personal bankruptcy. In addition, Mr. Alleman did