In re Mitchell

Candice and Merlin Mitchell (debtors) were highly educated professionals. Merlin owned multiple businesses individually and one business jointly with Candice. Beginning in May 2010, the Mitchells were sued by multiple creditors. The Mitchells sold stocks and mutual funds totaling almost $341,000 during 2010 but began thinking about filing for bankruptcy. In July 2011, Candice gave $16,000 to the Mitchells’ adult daughter. The Mitchells then filed a Chapter 7 bankruptcy petition in February 2012. In the schedules and statement of financial affairs (SOFA) filed with the petition, the Mitchells listed personal property valued at $1,455 and two boats valued at $100 each. The schedules and SOFA did not list the stock or mutual-fund sales or the $16,000 gift. After SunTrust Bank (SunTrust) (creditor) began questioning the Mitchells’ financial disclosures, the Mitchells amended their schedules and SOFA. The amended disclosures increased the value of the Mitchells’ personal property by over $10,000 due to the disclosure of additional items and revaluation of others. The amended disclosures mentioned the $16,000 gift but still omitted the stock and mutual-fund sales. The Mitchells subsequently prepared a “home inventory” of personal property that included more undisclosed assets, but they never updated their disclosures to include those additional assets. SunTrust filed an adversary proceeding seeking denial of discharge under 11 U.S.C. § 727(a)(4), asserting that the Mitchells had knowingly and fraudulently made false oaths in connection with the bankruptcy case. The Mitchells admitted to making inaccuracies and omissions on their disclosures but asserted that they were innocent mistakes due to forgetfulness, lack of knowledge, or their belief that the assets had no value. The Mitchells also claimed that they had given their asset list to their attorney and believed that the attorney had included all the necessary assets in the disclosures.