A bankrupt individual applied for discharge from personal bankruptcy arising from guarantees given for the debts of a failed company.
A creditor opposed the discharge, alleging the bankrupt had sufficient income and failed to properly account for assets and surplus income.
The court scrutinized the bankrupt’s financial disclosures, including unusually high tax withholdings and payments to a family member serving as a director of the successor corporation, which raised concerns about the accuracy of surplus income calculations and potential funds available to creditors.
Although direct evidence of misconduct was limited, the court found that fairness to creditors and the integrity of the bankruptcy system required a substantial payment as a condition of discharge.
The court ordered a conditional discharge requiring payment of $55,000 to the estate and directed that tax refunds be paid to the trustee.
