Business Law & Bankruptcy
Assignment #5
When Josh was asked, during a bankruptcy proceeding, whether he had ever been sued, he responded that he had not. In fact, he had once been sued for intentional infliction of emotional distress. That suit had been settled many years earlier and had no financial impact on Josh today. Josh’s debts were discharged in bankruptcy. Creditors want the discharge revoked because of Josh’s lie.
Should a discharge be revoked because of a lie made in court by the debtor that had no impact on the case?
In Dale Alleman v. Brett J. Kitson, 341 Fed. Appx. 234 (7 Cir. 2009) Brett J. Kitson and his wife, Courtney, had filed a joint bankruptcy petition in Bankruptcy Court for the Central District of Illinois. Dale Alleman commenced an adversary proceeding on behalf of himself and his company, Illectronics, Inc., where Mr. Kitson had previously been employed. He argued that Mr. Kitson was ineligible for discharge under 11 U.S.C.§727 because his bankruptcy petition and supporting documents contained various false statements and omissions. Mr. Alleman also claimed that Mr. Kitson owed him a $15,000 loan that was non-dischargeable.
The court had concluded that Mr. Alleman did not prove that Mr. Kitson concealed or destroyed any documents material to his bankruptcy petition, or made any material false statement in connection with it. Accordingly, the bankruptcy court concluded that Mr. Kitson was eligible for discharge of all of his non-secured debts. The court further found that Mr. Kitson had no nonexempt assets with which to pay any of the debts, accordingly, it granted Mr. Kitson's petition for bankruptcy discharge. Mr. Alleman appealed the decision to the district court, which affirmed. He then appealed to the United States Court of Appeals for the Seventh Circuit.
The Court of Appeals reviewed the district court’s decision. In this