Malley v. Agin, No. 11-2042 (1st Cir. 2012)Annotate this Case
Malley’s former marital house sold shortly before filing his Chapter 7 bankruptcy petition and netted more than $250,000, from which he declared under oath that he had received nothing. The trustee believed that $27,000, allegedly going to the ex-wife, were to be used to discharge Malley’s credit card debt. In taking action against Malley's ex-wife to avoid that disposition, the trustee determined that Malley had hidden his secret receipt of $25,000. Malley claimed he was unable to turn over the money to the trustee when ordered to do so. Malley’s willful concealment of the funds violated 11 U.S.C. 521. When the trustee moved for sanctions, the court denied discharge, under 11 U.S.C. 727, and charged the concealed amount, plus the cost of untangling the fraud, against the value of an asset claimed as exempt, Malley’s truck. The First Circuit affirmed. Fraudulent concealment of non-exempt assets is an exceptional circumstance in which an offsetting surcharge against otherwise exempt property interests is reasonably necessary to protect the integrity of the bankruptcy process and to ensure that a debtor exempts an amount no greater than the Code permits.
The court issued a subsequent related opinion or order on September 17, 2012.