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In re Simmons

United States Court of Appeals, First Circuit

January 20, 2016

IN RE MICHAEL J. SIMMONS, Debtor. WILLIAM K. HARRINGTON, Trustee, Appellee,
v.
MICHAEL J. SIMMONS, Debtor, Appellant

Page 853

[Copyrighted Material Omitted]

Page 854

APPEAL FROM THE BANKRUPTCY APPELLATE PANEL FOR THE FIRST CIRCUIT.

James P. Ehrhard for appellant.

Sumi K. Sakata, Trial Attorney, with whom Ramona D. Elliott, Deputy Director/General Counsel, Executive Office for United States Trustees, U.S. Department of Justice, P. Matthew Sutko, Associate General Counsel, William K. Harrington, United States Trustee, and Richard T. King, Assistant United States Trustee, were on brief, for appellee.

Before Lynch, Circuit Judge, Souter,[*] Associate Justice, and Selya, Circuit Judge.

OPINION

Page 855

SELYA, Circuit Judge.

In exchange for a fresh start, a debtor must paint a basic picture of his financial condition and satisfactorily explain the disposition of his assets during the period leading up to the filing of his bankruptcy petition. Here, the bankruptcy court pronounced the debtor's lack of documentation " shocking and disturbing" and found that he had not satisfactorily explained the disposition of his assets. Consequently, the court denied the debtor a discharge. The Bankruptcy Appellate Panel for the First Circuit (the BAP) upheld this decision. See Harrington v. Simmons (In re Simmons), 525 B.R. 543, 549 (B.A.P. 1st Cir. 2015). After careful consideration, we affirm.

I. BACKGROUND

In chapter 7 liquidation proceedings, an individual debtor may receive a discharge that absolves him from virtually all debts that arose before the bankruptcy case commenced.[1] See 11 U.S.C. § 727(a). Nevertheless, certain behavior may preclude the granting of a discharge. Two types of preclusive behavior are relevant here. For one thing, the bankruptcy court may deny a discharge if:

the debtor has concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information . . . from which the debtor's financial condition or business transactions might be ascertained, unless such act or failure to act was justified under all of the circumstances of the case . . . .

Id. § 727(a)(3). For another thing, the bankruptcy court may deny a discharge if:

the debtor has failed to explain satisfactorily, before determination of denial of discharge under this paragraph, any loss of assets or deficiency of assets to meet the debtor's liabilities . . . .

Id. § 727(a)(5).

In chapter 7 proceedings, the United States Trustee (the Trustee) may be heard on any issue. See id. § 307; see also In re Youk-See, 450 B.R. 312, 323 (Bankr. D. Mass. 2011) (explaining that the Trustee " protect[s] the integrity of the bankruptcy system" ). The Trustee is specifically authorized to object to the granting of a discharge in a chapter 7 case. See 11 U.S.C. § 727(c)(1).

Against this statutory backdrop, we proceed to the case at hand. Michael J. Simmons (the debtor) became involved in the real estate business around 1997. He left college before completing his degree to work in the real estate business with an individual named Kai Kunz. The debtor initially helped fund Kunz's own real estate investments but, by around 2006, he was identifying properties to purchase for his own account, obtaining financing, and hiring property managers. By 2007, he had acquired 27 rental properties in communities throughout Massachusetts.

For aught that appears, the debtor took title to the properties in his own name and signed all the pertinent loan documents. He hired managers to oversee the properties and collect rents. At least some of the rents were deposited into accounts maintained by the debtor or his managers, but the accounts were never segregated by tenant. Overall, ...


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