IN RE: (2025)

Chapter 7

ORDER DENYING DISCHARGE PURSUANT TO 11 U.S.C. § 727(a)(4)(A)

THIS MATTER came before the Court for a trial on January 23, 2025, to consider the Complaint filed by Plaintiff Gerard R. Vetter, Acting United States Trustee for Region Four (the “UST”) on May 6, 2024, requesting the Court deny Defendant Arzaa Bryant (“Bryant”) a discharge,¹ and the Answer thereto filed by Bryant.² Appearances were made by Peter D. Korn and Heather S. Bailey of Moss & Associates, Attorneys, P.A. (the “Firm”) on behalf of Bryant and Assistant U.S. Trustee Linda K. Barr (“Barr”) on behalf of the UST. Julie C. Smoak (“Smoak”), a Bankruptcy Auditor with the Office of the UST, testified, and 29 exhibits submitted by the UST, including recordings of prior testimony of Bryant, were admitted without objection. At the trial Bryant did not present the testimony of any additional witnesses, documentary evidence, or other form of evidence, and relied on his Answer to Complaint. The Court finds as follows.

Findings of Fact

On October 4, 2023, Bryant filed a petition for relief under Chapter 13 of the Bankruptcy Code, schedules, and statements, with the assistance of the Firm to initiate C/A No. 23-03005-HB.³ Bryant's initial schedules listed ownership interests in real property located at 837 Delverton Road, Columbia, SC 29203; personal property, including a 2019 Dodge Ram 1500 and a 2015 BMW X5; and a 100% ownership interest in Reliable Cleaning Lawn Care Maintenance & Transport, LLC. The only pre-petition transfer disclosed was the transfer of 302 Cypress Street, Dillon, SC 29536 for $5.00 to his ex-spouse, which was listed as being pursuant to a divorce settlement. Bryant also filed a Chapter 13 plan on the petition date. Annemarie B. Mathews (the “Chapter 13 Trustee”) was appointed trustee and a § 341 Meeting of Creditors was scheduled for November 21, 2023.

As the parties stipulate, Bryant's original schedules and statements were not accurate. On Schedule A/B, Bryant did not list his ownership interest in real estate located at 5481 Keith Road, Sumter, SC 29154 (the “Keith Road Property”),⁴ 302 and 306 Cypress Street, Dillon, SC 29536 (the “Cypress Street Properties”),⁵ and 3108 Hammond Avenue, Columbia, SC 29204 (the “Hammond Avenue Property”).⁶ Bryant also failed to disclose that he is owed $6,500.00 from a customer who is remitting payments to him. On his Statement of Financial Affairs, Bryant did not disclose the transfer or sale of real estate located at Van Dyke Road, Dillon, SC 29536 (the “Van Dyke Property”),⁷ 306 Cypress Street, a 2015 Ford Econoline, a 1993 Ford Mustang, or a 2004 GMC Sierra. Bryant also did not disclose the transfer, sale, or surrender of a 1998 Mercury Mountaineer, and did not disclose the closing of three bank accounts at SC SCU in the year before his bankruptcy filing.

On October 31, 2023, after the filing of his bankruptcy and without authorization from the Court, Bryant transferred his interest in the Hammond Avenue Property to a third party.⁸

On November 21, 2023, the first § 341 Meeting of Creditors was held at which Bryant testified that he had listed all his assets in his schedules and statements, had reviewed his schedules and statements prior to signing them, and that such schedules and statements were true and correct. At that meeting, Bryant testified he transferred 302 Cypress Street to his ex-spouse pursuant to a court-approved divorce settlement.⁹

On December 22, 2023, on the request of the Chapter 13 Trustee, the Court entered an Order denying confirmation of Bryant's Chapter 13 plan and providing the case would be dismissed unless a motion to convert to another chapter was filed within 10 days. Bryant's case was voluntarily converted to one under Chapter 7 on January 5, 2024, and the § 341 Meeting of Creditors was scheduled for February 2, 2024. Bryant did not appear at the February meeting, and it was continued to March 1, 2024.

On February 20, 2024, the UST filed a Motion for Bankruptcy Rule 2004 Examination of Bryant, and the Court entered an Order granting the motion the next day. At trial, Smoak testified that on February 26, 2024, the UST's office issued a subpoena on Bryant requesting information regarding the Cypress Street Properties, an additional lot on South Cypress Street, and the Van Dyke Property.

Bryant did not appear at the March 1, 2024, § 341 meeting, and it was continued to March 29, 2024.

On March 25, 2024, the UST filed a Motion to Extend Time to File Objection to Debtors Discharge. On March 29, 2024, the continued § 341 meeting was held.¹⁰ Responding to specific questioning posed by Barr, Bryant testified he had owned the Keith Road Property for approximately 2 years and there is no mortgage on the property. He estimated the property's value to be around $70,000.00 to $80,000.00. He testified he took out a HELOC loan on his residence to make improvements to the Keith Road Property, which is now a rental property, but he had not received rental payments in 4 months. He confirmed the post-petition sale of the Hammond Avenue Property. At that meeting, Bryant testified the transfers of the Cypress Street Properties were not pursuant to a court-approved divorce settlement as previously represented but rather an agreement between himself and his ex-spouse. He denied making any other transfers. Upon direct questioning by Barr, Bryant also confirmed the transfer of the Van Dyke Property.

It appears from the docket that the § 341 meeting was continued to April 8, 2024, continued again to April 26, 2024, and continued yet again to May 23, 2024.

On April 15, 2024, the Court entered an Order extending the time for the UST to file a complaint objecting to Bryant's discharge and a motion to dismiss Bryant's case from the original April 2, 2024, deadline to May 6, 2024.

On May 6, 2024—7 months after this case was filed—Bryant filed amended schedules and statements.¹¹

Also on May 6, 2024, the UST filed his Complaint to initiate the above-captioned adversary proceeding, requesting the Court deny Bryant a discharge in C/A No. 23-03005-HB pursuant to 11 U.S.C. § 727(a)(4)(A). The Complaint asserts Bryant knowingly and fraudulently, in and in connection with his bankruptcy case, made several false oaths or accounts in failing to disclose assets and transfers in his schedules and statements, and in his testimony at the § 341 meetings.

On May 23, 2024, another § 341 meeting was held at which Bryant testified regarding the disposition of the Hammond Avenue Property for which he estimated he received approximately $28,000.00 in the form of a cashiers check.¹² He admitted he did not have the requisite Court permission to sell that property as it was sold post-petition. He testified he cashed the cashier's check for the $28,000.00 at a bank and had kept the cash in his home. He testified he used those funds to pay his employees and some personal bills; however, he purported to have no records supporting his explanation of how the funds were disbursed.

On June 3, 2024, Bryant filed an Answer to Complaint.

On June 5, 2024, Bryant filed additional amended schedules and statements to address further deficiencies, namely the amounts owed to Bryant for services provided.¹³

The UST conducted Bryant's Rule 2004 examination on August 26, 2024. During that examination, Bryant testified he paid his ex-spouse $100.00 to complete the information packet regarding his assets to turn over to the Firm. He testified he did not review the packet or schedules and statements prior to signing them. Bryant testified he only reviewed what had been filed after he was informed the Trustee may liquidate his assets.

On October 29, 2024, the parties filed a Joint Pre-Trial Order.¹⁴ In the Joint Pre-Trial Order, Bryant conceded inaccuracies in his schedules and statements but asserted that his errors and omissions were honest mistakes. Noting that he has only an eighth-grade education, Bryant asserted that he relies heavily on family (including, formerly, his ex-wife) and hired professionals to explain complicated matters, and that he “has been confused on the entirety of the bankruptcy process” despite having received adequate counsel. Bryant further asserted that he has suffered from “depression and irrational perception of reality” following his divorce of his ex-wife who historically handled sensitive and important documents, that his errors and omissions resulted from “honest confusion”, and that he has shown good faith in filing amended schedules and statements.

On December 9, 2024, the Keith Road Property was sold at a tax sale.¹⁵

On January 23, 2025, the Court held a trial. Smoak testified, providing detail regarding many of the facts set forth above.

At the request of the parties, the undersigned listed to recordings of Bryant's prior testimony given under oath. After listening to the recordings of Exhibits 5 – 8, comprised of Bryant's November 21, 2023, March 29, 2024, May 23, 2024, and August 26, 2024, testimony, the undersigned notes that Bryant testified that he asked his ex-spouse to assist him with preparation of documents in this case but did not review them, although he did sign them. He testified that he suffered mentally and emotionally during the COVID-19 pandemic and asserted that he had difficulty understanding the bankruptcy proceedings. However, the recordings evidence a defendant that is adequately competent, literate, and sophisticated to give an accurate picture of his financial circumstances, asking questions and providing relevant information when pressed for details. He made vague complaints about his legal counsel, particularly in the March 29, 2024, recording. In that recording, he stated that the Firm advised him not to attend the § 341 meetings after the case was converted and that would likely result in dismissal of the Chapter 7 case. However, in the August 26, 2024, recording, Bryant changed that testimony, stating he “can't say that he [attorney] advised me” not to attend.

Applicable Law and Discussion

The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334 and 157, this matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(J), and the Court may enter a final order.

Section 727(a)(4)(A) of the Bankruptcy Code provides “the Court shall grant a debtor a discharge unless ․ the debtor knowingly and fraudulently, in or in connection with the case ․ made a false oath or account.” “The elements of § 727(a)(4)(A) are: (1) the debtor made a statement under oath; (2) the statement was false; (3) the debtor knew the statement was false; (4) the debtor made the statement with fraudulent intent; and (5) the statement materially related to the bankruptcy case.” In re Clark, No. 16–02104–HB, 2017 WL 598470, at *6 (Bankr. D.S.C. Feb. 13, 2017) (citing In re Poffenberger, 471 B.R. 807, 819 (Bankr. D. Md. 2012)). “A fundamental purpose of § 727(a)(4)(A) is to ensure that dependable information is supplied for those interested in the administration of the bankruptcy estate on which they can rely without the need for the trustee or other interested parties to dig out the true facts in examinations or investigations.” In re Haverland, 150 B.R. 768, 770 (Bankr. S.D. Cal. 1993) (internal quotations omitted). Whether the debtor has made a false oath under § 727(a)(4)(A) is a question of fact. In re Ward, No. 11-04760-DD, 2012 WL 3201871, at *9 (Bankr. D.S.C. Aug. 2, 2012) (citing Williamson v. Fireman's Fund Ins. Co., 828 F.2d 249, 251 (4th Cir. 1987)).

A statement does not have to be given orally while under oath for purposes of § 727(a)(4)(A). A false statement on a debtor's schedules or statement of financial affairs qualifies as a false oath. See In re Voccia, 477 B.R. 625, 632 (Bankr. E.D. Va. 2011). Although debtors are encouraged to file amended schedules and statements when new or erroneous information is discovered during the administration of their bankruptcy cases, filing amended schedules and statements only after confronted with evidence of one's errors and omissions does not nullify the effect of providing a false oath. See McClenny v. C.H. & R. Enters., Inc., 205 F.3d 1334, 1334 (4th Cir. 2000) (finding that the district court was correct in determining “[the debtors’] amendment of schedules after their fraud is discovered during the meeting of creditors does not negate the fraud.”) (citations omitted); see also In re Smith, 161 B.R. 989, 992-93 (Bankr. E.D. Ark. 1993) (denying discharge of debts where debtors made amendments to their schedules only after their false statements and omissions were discovered by the trustee).

Intent can be shown by direct evidence, circumstantial evidence, or inferences drawn from a course of conduct. In re Hooper, 274 B.R. 210, 219 (Bankr. D.S.C. 2001). “[T]he fraudulent intent element is satisfied if a debtor has exhibited a reckless indifference to the truth, and courts have found this reckless indifference where the number of errors in the debtor's oaths produces a cumulative effect that indicates a pattern of cavalier disregard for the truth.” Id. (citing Hatton v. Spencer (In re Hatton), 204 B.R. 477, 484 (E.D. Va. 1997)); Ward, 2012 WL 3201871, at *9 (“Fraudulent intent can also be satisfied by a reckless indifference or a pattern of cavalier disregard for the truth.”). “Courts are often understanding of a single omission or error resulting from an innocent mistake, but multiple inaccuracies or falsehoods may rise to the level of reckless indifference to the truth.” In re Berger, 497 B.R. 47, 56 (Bankr. D.N.D. 2013).

A statement is material to a bankruptcy case if “it concerns the existence or disposition of a debtor's property.” Robinson v. Worley, 540 B.R. 568, 573 (Bankr. M.D.N.C. 2015) (citing Williamson v. Fireman's Funds Ins. Co., 828 F.2d 249, 252 (4th Cir. 1987)).

“The Bankruptcy Code favors discharge of an honest debtor's debts and the provisions denying a discharge to a debtor are generally construed liberally in favor of the debtor and strictly against the creditor.” In re Weldon, 184 B.R. 710, 712 (Bankr. D.S.C. 1995). “In a proceeding to deny a debtor's discharge in bankruptcy, Bankruptcy Rule 4005 places the burden on the plaintiff to prove the objection by a preponderance of the evidence.” Voccia, 477 B.R. at 632 (citing Farouki v. Emirates Bank Int'l, Ltd, 14 F.3d 244, 249 (4th Cir. 1994)); see also Fed. R. Bankr. P. 4005 (“At the trial on a complaint objecting to a discharge, the plaintiff has the burden of proving the objection.”). “Once a plaintiff establishes a prima facie case, the burden shifts to the debtor to offer credible evidence to satisfactorily explain his conduct; however, the ultimate burden remains on the plaintiff objecting to discharge.” Hooper, 274 B.R. at 214-15 (citing Farouki, 14 F.3d at 249).

After a careful review of the evidence, the Court concludes the UST has met his burden of proof, and Bryant has failed to offer credible evidence satisfactorily explaining his conduct. The evidence, detailed above, overwhelmingly indicates that Bryant made false oaths and accounts involving interests in and transfers of personal and real property. While Bryant contends that these errors and omissions resulted from “honest confusion” and minimal formal education, the record before the Court indicates he was able to provide a full and accurate disclosure of his financial affairs, as he has shown an ability to carry out complex financial transactions and own and manage a business. Bryant only reviewed his disclosures after learning his assets may be liquidated and only amended his schedules and statements after it was clear that the UST was aware of his errors and omissions. Bryant's failure to be honest has impaired the ability of interested parties and the Court to timely obtain an accurate picture of his financial circumstances so his case can be properly administered. Under these circumstances, the elements of § 727(a)(4)(A) have been met.

IT IS, THEREFORE, ORDERED pursuant to 11 U.S.C. § 727(a)(4)(A), Arzaa Bryant shall not receive a discharge under 11 U.S.C. § 727 in C/A No. 23-03005-HB, and a judgment providing for the same shall be entered simultaneously herewith.

FOOTNOTES

1.   ECF No. 1. After the filing of this adversary, Matthew W. Cheney was appointed the new Acting United States Trustee for Region Four on January 11, 2025.

2.   ECF No. 4, filed June 3, 2024.

3.   UST's Ex. 1.

4.   UST's Ex. 11, 12.

5.   UST's Ex. 17, 20.

6.   UST's Ex. 24.

7.   UST's Ex. 14, 15 (indicating the Van Dyke Property was sold within 2 years of the petition date in March of 2023 by Bryant and Ronni Keena Byrd Bryant).

8.   UST's Ex. 26.

9.   UST's Ex. 5.

10.   UST's Ex. 6.

11.   UST's Ex. 3.

12.   The Chapter 7 Trustee filed an entry on the docket on May 28, 2024, that the § 341 meeting was held. However, based on the prior continuance of the meeting to May 23, 2024, and the recording admitted as UST's Ex. 7, it appears the § 341 was held on May 23, 2024.

13.   UST's Ex. 4.

14.   ECF No. 12.

15.   UST's Ex. 30.