United States Trustee v. ShaferUnited States Trustee v. Shafer
The matter before the Court is Plaintiff United States Trustee‘s Motion for Summary Judgment (doc. 18)1 and Debtor-Defendant Derek Rasmussen Shafer‘s objection (doc. 23) and amended objection (doc. 26)2. The Court has jurisdiction over this adversary proceeding under
FACTS
On June 16, 2023, Debtor-Defendant Derek Rasmussen Shafer (“Shafer“) filed a chapter 7 bankruptcy.3 On Shafer‘s Schedule A/B, he represented he does not own, lease or have any legal or equitable interest in any vehicles. (Bankr. doc. 1, p. 10). He disclosed he owns machinery, fixtures, equipment, supplies and tools valued
Construction tools and equipment co-mingled and located on former girlfriend‘s rental property. She has refused efforts by debtor to retrieve the property items. Detailed list, value and location details on list attached hereto as Attachment 1. Estimated value.
In response to the question on Shafer‘s Statement of Financial Affairs asking whether he has property in a storage unit or at a place other than his home, Shafer disclosed, “Former girlfriend has my personal property items and construction business equipment at this address and refuses to allow me to get it. Her name is Jessica Osterman.” He provided her address and estimated the value of the property to be $70,465.00, again referencing the list attached as Attachment 1. (Bankr. doc. 1, p. 52). Attachment 1 lists 62 entries, many of which include multiple pieces of property. (Bankr. doc. 1, pp. 55-58).
Shafer also disclosed on his Statement of Financial Affairs he was holding property owned by someone else. Specifically, he listed an “[o]lder camper-motor home” owned by Rich Kroll [sic]4 and explained: “[Shafer] is using it as a living space until he can get moved into an apartment.” He also disclosed a Chevrolet C1500 truck owned by Chad Sjursom and explained: “[Shafer] is borrowing it to get back and forth to work until he can get a vehicle of his own.”
Shafer did not disclose any property repossessed or foreclosed within the year prior to his bankruptcy filing. He similarly did not disclose any losses from theft, fire, other disaster or gambling, nor did he disclose any transfers of property within two years prior to filing bankruptcy.
At the meeting of creditors, Shafer testified none of his property was sold, transferred, given away or repossessed within the 90 days prior to his bankruptcy filing. He also testified he did not give any property away to a friend or relative in the two years before his bankruptcy. He affirmed he did not own any property other than that listed on his schedules.
The Court granted Shafer a discharge on September 29, 2023, and his case was closed on July 23, 2024.
In April 2024, an individual sent an email to the United States Trustee Program‘s bankruptcy fraud reporting address asserting Shafer concealed assets during his bankruptcy case (doc. 18-3). Following up on this tip, the United States Trustee (“UST“) requested and received vehicle registration and ownership records associated with Shafer from the South Dakota Department of Motor Vehicles (DMV) (doc. 18-4, UST Ex. B). The reports supplied by the DMV identify numerous vehicles have titles or registrations associated with Shafer as of July 30, 2024, the date the DMV ran the report.
On September 23, 2024, the UST commenced this adversary proceeding against Shafer, seeking a revocation of Shafer‘s discharge under
The UST filed a motion for summary judgment, and Shafer opposed the motion. Specifically, Shafer states in an affidavit in support of his objection to the motion for summary judgment:
Prior to the 3-year window of time in the Statement of Financial Affairs, I operated a construction business in the Webster, South Dakota area. That business closed in early 2020 as the result of a foreclosure action by Cortrust Bank. Cortrust Bank took possession of the business assets, to include any real estate, vehicles and equipment. Cortrust Bank held a foreclosure auction in early 2020, but the auction did not go well due to the early stages of the Covid 19 Pandemic economy. I do not know what became of any items at the bank sale that did no [sic] sell.
(doc. 23-2).
DISCUSSION
I. Summary Judgment Standard
Summary judgment is appropriate when there is no genuine issue as to any material fact and the movant is entitled to a judgment as a matter of law.
When filing a summary judgment motion, the movant has the burden to show the parts of the record that demonstrate the absence of genuine issues of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); see also Gibson v. Am. Greetings Corp., 670 F.3d 844, 853 (8th Cir. 2012). The movant meets his burden if he shows the record does not contain a genuine issue of material fact and identifies the part of the record which bears out his assertion. Handeen v. LeMaire, 112 F.3d 1339, 1346 (8th Cir. 1997). Further, “[i]f the moving party is the plaintiff, it carries the additional burden of presenting evidence that establishes all elements of the claim.” Ramette v. Al & Alma‘s Supper Club Corp. (In re Bame), 252 B.R. 148, 154 (Bankr. D. Minn. 2000).
Once the movant has met his burden, then the burden shifts to the non-movant. Gibson v. Am. Greetings Corp., 670 F.3d at 856. The non-moving party must advance specific facts to create a genuine issue of material fact to avoid summary judgment. F.D.I.C. v. Bell, 106 F.3d 258, 263 (8th Cir. 1997).
However, the evidence must be viewed in the light most favorable to the party opposing the motion. Id. at 263; Amerinet, Inc. v. Xerox Corp., 972 F.2d 1483, 1490 (8th Cir. 1992) (quoting Matsushita Elec. Industrial Co. v. Zenith Radio, 475 U.S. 574, 587-88 (1986)). In addition, the non-moving party is entitled to all reasonable inferences that can be drawn from the evidence without resorting to speculation. P.H. v. Sch. Dist. of Kansas City, Missouri, 265 F.3d 653, 658 (8th Cir. 2001).
II. 11 U.S.C. §727(d)(1) and (2)
In the amended complaint, the UST seeks the revocation of Shafer‘s bankruptcy discharge under section 727(d)(1) and (2) of the Bankruptcy Code, which provides:
On request of the trustee, a creditor, or the United States trustee, and after notice and a hearing, the court shall revoke a discharge granted under subsection (a) of this section if-
(1) such discharge was obtained through the fraud of the debtor, and the requesting party did not know of such fraud until after the granting of such discharge;
(2) the debtor acquired property that is property of the estate, or became entitled to acquire property that would be property of the estate, and knowingly and fraudulently failed to report the acquisition of or entitlement to such property, or to deliver or surrender such property to the trustee[.]
To succeed on her section 727(d)(1) claim, the UST must show Shafer committed a fraud which would have barred his discharge had the fraud been known at the time of the discharge. See Jensen v. Bebeau (In re Bebeau), 2022 WL 17661134, at *4 (Bankr. D. Minn. Dec. 12, 2022); see also Johnson v. Johnson, 542 F. Appx. 536, 538 (8th Cir. 2013) (“Under §727(d)(1), if a creditor can show that a bankruptcy debtor obtained discharge through fraud and the creditor did not know of the fraud until after discharge, the court is required to revoke the bankruptcy
Under section 727(d)(2), the Court must revoke the discharge of a chapter 7 debtor if the debtor acquired estate property and knowingly and fraudulently failed to report the acquisition of such property or to deliver such property to the trustee. In re Toftness, 439 B.R. at 503. The first step is to determine if the debtor acquired property of the estate. Id.. The second step is to determine whether the debtor knowingly and fraudulently failed to report or to deliver property of the estate to the trustee. Id. at 504.
The UST asserts in its amended complaint “the UST is informed [Shafer] owned a number of pieces of property at the time of his bankruptcy filing,” contrary to the information in Shafer‘s schedules and his testimony at the meeting of creditors. The UST also alleges that 10 of the pieces of property are vehicles which were registered in Shafer‘s name but now have expired registrations. The UST asserts Shafer withheld his interest in numerous vehicles from the bankruptcy trustee and fraudulently obtained his bankruptcy discharge by making false oaths regarding his ownership of the vehicles.5 The UST also alleges she did not receive information about Shafer‘s alleged nondisclosure of assets prior to Shafer‘s discharge (doc. 18-2).
In his opposition to the motion for summary judgment, Shafer denies the allegations made by the tipster who emailed the UST. Shafer submitted his affidavit
The Court finds genuine issues of material fact exist as to Shafer‘s ownership of-or acquisition of or entitlement to-the property identified by the UST and underpinning the section 727(d) claims, precluding the Court from granting the UST‘s motion for summary judgment.
CONCLUSION
The UST has failed to meet her burden of showing the elements of section 727(d)(1) or (2) have been met, and genuine issues of material fact remain to be resolved. As such, the UST is not entitled to judgment as a matter of law. The Court will therefore enter an order denying the UST‘s motion for summary judgment, and the case will proceed to trial on September 9, 2025.
So ordered: July 25, 2025.
BY THE COURT:
Laura L. Kulm Ask
Bankruptcy Judge