The failure of debtors to accurately list and value assets in their bankruptcy schedules is certainly not a new phenomenon. Recently, however, we are witnessing an increase in bankruptcy cases where debtors are using clever and deliberate means to omit assets or disguise the true value of their assets in an attempt to thwart recovery by creditors. While the U.S. trustee’s or a creditor’s remedy for such bad acts is to seek a denial of the debtor’s discharge under 11 U.S.C. Section 727, the purpose of this article is to highlight that it is often the efforts of creditors (as well as those of the U.S. trustee) that are instrumental in exposing these deceptive and dishonest acts. The recent decision in U.S. Trustee v. Pynn (In re Pynn), No. 2:14-bk-28537-TD (Bankr. C.D. Ca. 2016), is illustrative of this issue.
Facts
Darren Pynn (the debtor) filed his individual Chapter 7 petition for bankruptcy protection Sept. 29, 2014. Pynn listed in “Schedule B-Personal Property” various personal assets, which included a 1966 Porsche 911 that he valued at $5,000, multiple guitars that he collectively valued at $2,750, and several bicycles that he collectively valued at $2,600. Because the stated value of these assets was relatively low, Pynn was able to claim all of these assets as fully exempt pursuant to California’s statutory exemption scheme.
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