09-3448 Stamat v. Neary

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Bankruptcy

Denial of discharge

Where the debtors made numerous material omissions, displaying a reckless disregard for the truth, they were properly denied discharge of their debts.

“Some bankruptcy courts examining ‘ordinary course,’ both in the section 727 context and in others, have found that the payment of living expenses occurs in the ‘ordinary course of affairs.’ See In re Oliver, 414 B.R. 361, 377-78 (Bankr. E.D. Tenn. 2009); see also In re Keenan, 195 B.R. 236, 241 (Bankr. W.D.N.Y. 1996) (‘meeting his personal expenses was unquestionably within the “ordinary course” of . . . financial affairs’). Bankruptcy courts have suggested, however, that the transfer of funds between the debtor’s personal account and corporations controlled by the debtor is not part of the ordinary course of business. See, e.g., In re Phillips, 418 B.R. 445, 462-63 (Bankr. M.D. Fla. 2009) (‘The Plaintiff established at trial the existence of numerous substantial transfers between the Debtor and various corporations controlled by the Debtor within the two years prior to the filing. . . . [W]hile there is insufficient evidence to establish fraudulent transfer for purposes of denial of discharge under § 727(a)(2)(A), it was clearly established that there were transfers of the Debtor’s interests outside the ordinary course of business.’). Here, the Stamats acknowledge using the proceeds to pay for both personal expenses and expenses related to Stamat Pediatrics, a separate legal entity. Furthermore, the bankruptcy court in its section 727(a)(5) analysis found that the Stamats failed to satisfactorily explain the loss of the proceeds, which means that all specific uses of the proceeds were not established. In light of this record, we cannot find that the refinancing and use of the $90,000 was in the ordinary course of business or financial affairs.”

Affirmed.

09-3448 Stamat v. Neary

Appeal from the United States District Court for the Northern District of Illinois, Gottschall, J., Williams, J.