15 B 35985, 17 A 00192
Plaintiff David R. Brown (the “Trustee”) filed an adversary complaint against Robert J. Ferrari (the “Debtor”), seeking a denial of the Debtor’s discharge pursuant to 11 U.S.C. §§ 727(a)(2)(A), (a)(3), and (a)(5).  The Trustee argued that the Debtor was not entitled to a discharge because: (1) he transferred or removed equity in his home within one year of filing his bankruptcy petition with intent to hinder, delay, or defraud creditors by executing a junior mortgage on the home in favor of his friend; (2) he failed to keep or preserve books and records from which his financial condition could be ascertained; and (3) he failed to satisfactorily explain the loss or disposition of almost $250,000 that he allegedly borrowed from his friend.  After conducting an evidentiary hearing, the Court found that, given the documentary evidence and testimony at trial, the Debtor’s records were inadequate to allow the Court, the Trustee, and the Debtor’s creditors to trace his financial dealings with any kind of accuracy and that the Debtor did not offer any reasonable justification for his failure to keep or preserve financial records.  Thus, the Court held that that failure supported denial of the Debtor’s discharge under § 727(a)(3).  The Court further found that the Debtor failed to provide a satisfactory explanation for the disposition of both the equity in his home and the loan proceeds from his friend.  Accordingly, the Court also held that the Debtor was not entitled to a discharge pursuant to § 727(a)(5).  Although the Court found that the removal of equity from the Debtor’s home was a transfer for purposes of § 727(a)(2)(A), the evidence did not sufficiently establish that the Debtor actually intended to defraud his creditors.  As such, the Court did not find in the Trustee’s favor on the § 727(a)(2)(A) count of the complaint and, thus, that count was dismissed.