613 B.R. 119
Bankr. E.D. Wis.2020Background
- Debtors Gary and Joan Pansier filed a joint Chapter 7 petition on March 19, 2018; this was their third bankruptcy filing.
- In 2012 the Pansiers implemented a "specialized trust strategy" (STS): they transferred assets into several trusts (Fly Slow F.O. CT, CL; Fly Slow F.O. Living Trust; Tuscany Trail CT, CL) and formed a single‑member LLC (Casey’s Shadow); earlier (1985) Joan placed the Crivitz residence into the Sheffield Crest Trust.
- The Pansiers continued to live at and use the Crivitz Property and to draw on trust/LLC bank accounts and trust funds to pay personal expenses.
- The debtors did not disclose their beneficial interests in the STS trusts, Casey’s Shadow LLC, certain BMO bank accounts, rental income/proceeds held by Sheffield Crest, or a UCC filing on schedules, SOFA, and at the §341 meeting; many disclosures were made only after U.S. Trustee inquiries and a Rule 2004 motion.
- The U.S. Trustee sued to deny discharge under 11 U.S.C. §§ 727(a)(2), (3), (4)(A) and (5); the Court granted summary judgment for the U.S. Trustee on Counts I and III (§§ 727(a)(2) and 727(a)(4)(A)) and denied summary judgment as to Counts II and IV (§§ 727(a)(3) and 727(a)(5)).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| §727(a)(2) concealment of assets | Pansiers concealed beneficial interests in multiple trusts and an LLC, concealed rent cash and trust cash, and continued using trust assets as personal property | Pansiers contend they lacked beneficial interests, transfers occurred earlier (some trust transfers rescinded), and they relied on prior filings/advice | SJ for U.S. Trustee: concealment proven (continuing concealment, control/use of assets); intent to hinder/delay/defraud established; discharge denied under §727(a)(2) |
| §727(a)(3) failure to keep books/records | Trust ledgers and receipts are inaccurate, incomplete, tax returns missing or inconsistent; creditors cannot ascertain finances | Debtors say they produced many documents, are not trustees of Sheffield Crest so not responsible for those records, and should be judged as ordinary consumer debtors | SJ denied: genuine disputes whether debtors were responsible for trust records and whether any failure was justified; factual issues for trial |
| §727(a)(4)(A) false oath/omissions | Debtors knowingly omitted trusts, LLC, bank accounts, UCC lien, lease/rental income and gave false testimony and incomplete amendments | Debtors claim confusion, reliance on prior counsel/forms, later amendments show good faith disclosure | SJ for U.S. Trustee: omissions and false statements (and reckless disregard) were knowing/material; summary judgment appropriate; discharge denied under §727(a)(4)(A) |
| §727(a)(5) failure to explain loss/diminution of assets | Debtors cannot satisfactorily explain disposition of equity in Crivitz Property or prepetition cash withdrawals | Debtors say transfers were rescinded, and withdrawals covered living expenses and extraordinary costs; produced a rescission minute late | SJ denied: factual disputes on ownership/rescission, UCC filings, and adequacy/corroboration of explanations; matter for trial |
Key Cases Cited
- Kontrick v. Ryan, 295 F.3d 724 (7th Cir. 2002) (discharge exceptions construed strictly; act + intent framework)
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (summary judgment burden-shifting standard)
- Anderson v. Liberty Lobby, 477 U.S. 242 (U.S. 1986) (genuine‑issue/material‑fact standard)
- Kauffman v. Friedell (In re Kauffman), 675 F.2d 127 (7th Cir. 1982) (transfer of title plus continued use can constitute concealment)
- Chavin v. Eisen (In re Chavin), 150 F.3d 726 (7th Cir. 1998) (reckless disregard equals knowledge; credibility may be resolved on summary judgment in extreme cases)
- Juzwiak v. United States (In re Juzwiak), 89 F.3d 424 (7th Cir. 1996) (§727(a)(3) requires records sufficient to trace financial history; sophistication raises duty)
- Scott v. Petters (In re Scott), 172 F.3d 959 (7th Cir. 1999) (higher record-keeping expectations for sophisticated/business debtors)
- Hart v. United States (In re Hart), 563 B.R. 15 (Bankr. D. Idaho 2016) (similar fact pattern: debtor retained secret interest in residence/trust; concealment found)
- Layng v. Sgambati (In re Sgambati), 584 B.R. 865 (Bankr. E.D. Wis. 2018) (post‑discovery amendments do not cure initial false oaths)