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Fokkena v. Klages: BANKRUPTCY - no error revoking discharge for not giving trustee 1.5k tax refund

United States Bankruptcy Appellate Panel
No. 07-6051 SI
In re: *
Robert D. Klages, *
Debtor. *
Habbo Fokkena, U.S. Trustee, * Appeal from the United States
* Bankruptcy Court for the
Plaintiff - Appellee, * Southern District of Iowa
v. **
Robert D. Klages, *
Defendant - Appellant. *
Submitted: January 29, 2008
Filed: January 31, 2008
Before SCHERMER, MAHONEY and MCDONALD, Bankruptcy Judges
SCHERMER, Bankruptcy Judge
discharge. The Debtor also admitted receiving the written warning to that effect. The
Debtor acknowledged the Trustee’s request for a copy of his tax returns when
prepared. The Debtor clearly knew he had a duty to provide a copy of his tax returns
to the Trustee and that he may have a duty to deliver tax refunds to the Trustee. The
Debtor’s failure to do so was thus done knowingly.
In order to support revocation of the discharge, the Debtor’s failure to deliver
the non-exempt tax refund must also have been done fraudulently. Fraudulent intent
may be established by showing that the debtor knowingly made an omission that
misleads the trustee or that the debtor engaged in a fraudulent course of conduct. In re
Kasden, 209 B.R. at 244. A debtor’s intent may be inferred from all the surrounding
circumstances where the debtor’s pattern of conduct supports a finding of fraudulent
intent. Id. The focus is on whether the debtor’s actions appear so inconsistent with
his self-serving statement of intent that the proof leads the court to disbelieve the
debtor. Id. Fraudulent intent may also be established by showing that the debtor acted
so recklessly that fraud can be implied. Id. at 244-45.
Fraud is rarely established by admission. Instead, the trial court must look at
the circumstantial evidence and the events that occurred to try to determine intent. In
re Kadsen, 209 B.R. at 245. Here the trial court looked at the circumstances and
determined that the Debtor knew he had a duty to turn over copies of his tax returns
to the Trustee and that he knew that he should not spend any tax refund without first
contacting the Trustee’s office. The court determined that the Debtor knew his
obligations regarding the tax returns and tax refunds continued even if he received a
discharge. The Trustee told the Debtor this and gave him a written admonition to this
effect. The Debtor’s assertion that he did not read the handout is irrelevant. A debtor
cannot ignore information given to him and then claim ignorance. Such behavior is
so reckless that fraud can be implied. Id.
The bankruptcy court determined that the Debtor’s explanation that he thought
he could spend the tax refund because of his discharge was not credible. The
bankruptcy court made this determination after carefully observing the Debtor’s
demeanor while he testified. We afford due deference to the bankruptcy court’s
determination regarding credibility and find nothing in the record to reverse that
determination. Fed.R. Bankr. P. 8013; Richardson v. Suggs, 448 F.3d at 1052; In re
Kadsen, 209 B.R. at 241. The bankruptcy court’s factual findings are supported by
the evidence. Richardson v. Sugg, 448 F.3d at 1052. The bankruptcy court correctly
applied the law. Richardson v. Sugg, 448 F.3d at 1052. Accordingly, we affirm.
The bankruptcy court found that the Debtor knowingly and fraudulently failed
to deliver his non-exempt tax refund to the Trustee. Based on these findings, the court
revoked the Debtor’s discharge pursuant to Section 727(d)(2) of the Bankruptcy Code.
The evidence supports the bankruptcy court’s findings of fact and conclusions of law.
Accordingly we affirm the bankruptcy court’s judgment revoking the Debtor’s


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