STUTZMAN v. HEINLE, 646 B.R. 306

Debtor David E. Heinle filed Chapter 7 on November 19, 2021 after a $180,000 default judgment entered against him by plaintiff Lynn Stutzman; Stutzman filed this adversary complaint under 11 U.S.C. § 727(a)(4)(A) seeking denial of discharge for false oaths.
Heinle formerly co‑owned and operated Broken Fiddle Ranch LLC with Stutzman; the LLC dissolved in 2019 but Heinle continued activities (livestock sales, care/breeding) as a sole proprietorship and realized roughly $12,900 in 2021 sales.
Heinle omitted a 2016 Ski‑Doo snowmobile (title in his name, co‑used with John Cunningham) and a weanling pony from his schedules; the mare (the weanling’s mother) was disclosed later on amended schedules.
Plaintiff claims Heinle also failed to disclose prepetition livestock sales income and ongoing business operations; Heinle testified he believed omissions were oversights or based on his view that the LLC’s dissolution ended the business.
Trial occurred; Heinle was the sole witness, the Chapter 7 trustee did not join or testify, and the court admitted multiple exhibits. The court found the omissions material but concluded Heinle acted negligently/recklessly, not knowingly or with fraudulent intent.
Result: court denied Stutzman’s request to deny discharge and allowed Heinle’s Chapter 7 discharge to be entered.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Heinle made false oaths in bankruptcy	Heinle omitted the snowmobile, weanling, business activity and sales — so yes	Omissions were oversights or based on belief that LLC dissolution ended business; some assets exempt or co‑owned	Yes — omissions occurred; Heinle admitted some omissions
Materiality of omissions	Omissions relate to assets/business transactions and thus are material under a broad standard	Materiality requires showing detrimental effect on estate administration	Material — omissions related to discovery of assets/business and thus material
Whether omissions were made knowingly (deliberately)	Multiple omissions permit inference of knowing or reckless concealment	Omissions were careless/oversight, not deliberate	Not knowingly — court found carelessness/recklessness but not deliberate knowledge
Whether omissions were made with fraudulent intent	Intent to deceive creditors/trustee shown by nondisclosure of income and assets	Credible explanations and candor at trial rebut fraudulent intent	No fraudulent intent proven; discharge not denied

Majewski v. St. Rose Dominican Hosp., 310 F.3d 653 (9th Cir. 2002) (bankruptcy fresh start requires accurate filings)
Cusano v. Klein, 264 F.3d 936 (9th Cir. 2001) (debtor duty to prepare petition and schedules carefully)
Retz v. Samson, 606 F.3d 1189 (9th Cir. 2010) (elements required to prevail under § 727(a)(4)(A))
Devers, 759 F.2d 751 (9th Cir. 1985) (intent may be inferred from circumstances)
Curry v. Castillo (In re Castillo), 297 F.3d 940 (9th Cir. 2002) (role and significance of trustee in discharge investigations)
First Beverly Bank v. Adeeb, 787 F.2d 1339 (9th Cir. 1986) (§ 727 claims construed strictly against the objecting party)