U.S. Court of Appeals For the Seventh Circuit
Bankruptcy — Discharge — fraud
Where a debtor’s schedules contained material, intentional omissions, the district court properly denied discharge, even if she did not do so for any pecuniary gain.
“The bankruptcy judge’s ruling in favor of Katsman was further vitiated by a misunderstanding of ‘fraudulently … ma[king] a false oath or account’ in 11 U.S.C. § 727(a)(4)(A). The bankruptcy judge thought that Katsman couldn’t have violated the statute unless she had intended by her false statements to obtain a pecuniary benefit rather than, as appears to be the case, merely to benefit one group of creditors over another for personal reasons. As explained in United States v. Gellene, 182 F.3d 578, 586–87 (7th Cir. 1999), ‘fraudulent’ in bankruptcy law includes ‘inten[ding] to deceive,’ which need not connote intending to obtain a pecuniary benefit. United States v. Sabbeth, 262 F.3d 207, 217 (2d Cir. 2001); Collier on Bankruptcy ¶ 7.02[a][iv][B] (Alan N. Res-nick & Henry J. Sommer eds., 16th ed. 2010). Although Katsman is an immigrant and English is not her native tongue, she knows English and had as we said competent counsel, who doubtless advised her (or if asked by her would have advised her) to list all her creditors. She did not list them all. Conceivably she did not understand the legal meaning of ‘creditor,’ and thought someone she hoped to repay in the future was therefore not a creditor. But failing to seek advice of counsel, while knowing that she lacked legal training or knowledge, bespoke a reckless indifference to truth, and no more is required for fraudulent intent in bankruptcy.”
13-1881 In re Katsman
Appeal from the United States District Court for the Northern District of Illinois, Norgle, J., Posner, J.