UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
STANLEY JAY ROBERTS CASE NO. 92-10496
MARSHA DALE ROBERTS
This matter is before the Court upon the motion of the United States Trustee filed July 6, 1993 seeking the dismissal, pursuant to 11 U.S.C.'707(a), of the petition filed herein by the debtors and an order of this Court temporarily enjoining the debtors from obtaining a discharge of their debts for a three year period.
The undisputed facts disclose that the debtor Stanley Jay Roberts, who was primarily involved in the contracting business, also owned a corporation which sold a pawn shop to a corporation owned by the mother of debtor Marsha Dale Roberts. This occurred approximately nine months prior to filing their Chapter 7 proceeding herein and the consideration therefore was the assumption of a mortgage in the amount of $59,349.98 plus $11,200.00 for certain personal property including pawn inventory, non-pawn inventory and fixtures. The debtors testified that the sums owed for the personal property were paid to them and were consumed by them prior to filing since they were not employed for some time after selling the pawn shop. The debtors filed their petition herein on December 30, 1992. This transaction was not disclosed in the Statement of Affairs filed by the debtors as it should have been in response to question 16 therein as a business in which the debtors were involved within two years prior to filing. The information came to light post-petition in a deposition taken on June 1, 1993.
It has also come to light that the debtors made some other conveyances of real property some 363 and 364 days prior to the filing of their petition which were not disclosed in the Statement of Affairs under question 10 which requires disclosure of such transfers within one year before the filing. The debtors have testified that the exchanges, also involving the parents of debtor Marsha Dale Roberts, were exchanges of tracts of real property made to mutually benefit the parties since their homes are located near each other.
No amendments have been made to the Statement of Affairs to reflect any of these omissions. The debtors contend that the deficiencies are the result of oversight on their part.
The petition lists $327,159.59 in unsecured debts and $81,889.56 in priority debts. The debtors contend that the great bulk of these debts is related to the failed contracting business, not to the pawn shop and cite this large amount of debt as argument for their need for relief under Chapter 7. The Schedules herein originally listed $106,810.00 in assets although, by amendment to their Schedules, the debtors have deleted some of the property originally listed.
Lack of good faith in filing a petition under Chapter 7 is "cause" pursuant to 11 U.S.C.'707(a). In re Zick, 931 F.2d 1124 (6th Cir. 1991). This Court holds that glaring omissions from the schedules filed by debtors may evidence a lack of good faith in filing the proceeding. The omissions in this proceeding, which were disclosures of dealings with insiders, can only raise the suspicion of the Court and militate against the debtors.
For the foregoing reasons, the motion of the United States Trustee to dismiss this proceeding should be sustained and the debtors should be prohibited from seeking relief from their dischargeable debts under the Bankruptcy Code for a period of one year. A separate order will be entered.
Dated this ______ day of November, 1993.
By the Court-
Attorney for Debtors
United States Trustee