In re: Earl Blasingame, 15-8025

Background

Earl Benard and Margaret Blasingame filed a Chapter 7 petition in 2008; initial petition, schedules, and statement of financial affairs omitted various trusts, corporate interests, annuities, accounts, and liabilities.
Debtors signed § 341 affidavits and testified at the § 341 meeting under oath that they had read, understood, and were familiar with their petition, schedules, and SoFA.
At trial the Debtors admitted they did not read the petition/schedules before signing and that many initial filings contained omissions; schedules and SoFA were amended multiple times.
Trustee and creditors (Church Joint Venture and Farmers & Merchants Bank) sued in an adversary proceeding seeking denial of discharge under multiple § 727 grounds; lengthy discovery and sanctions litigation regarding Debtors’ former counsel occurred.
The bankruptcy court denied the Debtors’ discharges under 11 U.S.C. § 727(a)(4) for knowingly and fraudulently making false oaths; Debtors appealed that denial and separately appealed the court’s order striking certain documents from the designation of record.
The Bankruptcy Appellate Panel (BAP) affirmed denial of discharge under § 727(a)(4), reversed in part and affirmed in part the order striking designated documents (allowed certain court orders into the record but not party filings).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Debtors knowingly and fraudulently made false oaths under § 727(a)(4)	Trustee: Debtors swore they had read and were familiar with their petition/schedules but later admitted at trial they had not — the sworn misstatements were false, knowing, material, and made with fraudulent intent	Debtors: Omissions were unintentional; they relied on counsel to prepare and amend filings and lacked fraudulent intent	Held: Affirmed — false sworn statements in § 341 affidavits/meeting were knowing, material, and made with fraudulent intent; discharge denied under § 727(a)(4).
Whether Debtors reasonably relied on advice of counsel to excuse false oaths	Trustee: No evidence counsel told Debtors to lie; reliance would be unreasonable when oath acknowledged under penalty of perjury	Debtors: They relied on counsel (Fullen/Grusin) who prepared filings and advised them, so errors should be imputed to counsel	Held: Rejected Debtors’ reliance defense as unreasonable; Debtors remain responsible for their sworn statements.
Whether omissions warrant denial under § 727(a)(2)(A)/(B) (transfer/concealment)	Trustee: Additional grounds exist based on concealment/transfers with intent to hinder creditors	Debtors: Contend lack of intent and disclosure to counsel	Held: BAP did not decide § 727(a)(2) because affirmance under § 727(a)(4) made alternative ruling unnecessary.
Whether the bankruptcy court erred in striking certain designated documents from the record on appeal	Debtors: Sanctions orders and related court orders bear on advice-of-counsel defense and should be in the record	Appellees: Many designated items were party filings that were not considered by the court and do not contain court findings	Held: Mixed — BAP reversed striking of certain court orders (sanctions and denial of compromise) as they are closely related and contain findings; affirmed striking of various party filings that lacked court findings.

Key Cases Cited

Keeney v. Smith, 227 F.3d 679 (6th Cir. 2000) (elements for denying discharge for false oath)
Browning v. Levy, 283 F.3d 761 (6th Cir. 2002) (debtor’s affirmative duty to disclose assets)
Grogan v. Garner, 498 U.S. 279 (1991) (discharge intended for the honest but unfortunate debtor)
Anderson v. City of Bessemer City, 470 U.S. 564 (1985) (clear error standard for factual findings)