MEMORANDUM OPINION DENYING THE DEBTOR'S DISCHARGE

KAREN S. JENNEMANN, Bankruptcy Judge.

Plaintiff, International Speedway Corporation, objects to the Debtor/Defendant's discharge under § 727 of the Bankruptcy Code1 because he kept no meaningful financial records, failed to explain his loss of assets, and made a false oath or account on his bankruptcy petition. Debtor denies these allegations claiming he spent all his money on living expenses and paid all his bills in cash because he opposed the banking system. After a full day trial considering the Debtor's testimony and admitted evidence, the Court will deny the Debtor's discharge.2

Before this bankruptcy was filed in 2016,3 the Debtor was a successful insurance salesman and owned a business that sold insurance for many years.4 Plaintiff leased office space to the Debtor for his business;5 there was a default on the lease; the Plaintiff sued the Debtor in Volusia County. The Florida state court entered a final default judgment of approximately $219,000 in the Plaintiff's favor.6 This judgment is listed on the Debtor's Schedule E/F and is a large majority of the Debtor's listed unsecured debt (about 83%).7

Although the testimony was unclear on the exact date, the Debtor "closed" his insurance business around the same time he defaulted on the lease.8 Debtor earned substantial income after closing his own business; he earned $300,000 a year at his last salaried job that terminated about a year pre-petition.9

But, after the Plaintiff got the sizeable judgment against the Debtor, he left a traditional employment situation and worked at several independent contract jobs with various insurance agencies and other companies shortly before he filed this bankruptcy case.10 He initially stated he made about $2,000 from these independent jobs, but during the trial, the Debtor testified that it may have been more than that.11 The Court finds the Debtor's testimony ambiguous and untruthful. It is not credible that the Debtor's earning decreased from $300,000 a year to earn only $2,000 a year. On his petition, he listed $1,669 in gross income in the year 2016, earning about $238 per month.12 In the year before that, the Debtor listed that he received about $265,000 in gross income.13 Debtor, who excels at selling insurance, surely earned substantially more than $2,000 in 2016, although the exact amount is not discernable due to the Debtor's failure to keep financial records.

Shortly before filing bankruptcy, Debtor also switched from keeping normal financial records and using checks and banks to operating exclusively on a cash basis. He operated in cash from at least October 2015 until his bankruptcy was filed.14 He paid rent and all his bills in cash. He lives in a house owned by his mother's trust.15 His mother accepts rent in cash randomly and in varying amounts.16 There are no receipts for these inter-family transactions.17 Each time rent was paid, if it was, the Debtor traveled up to Massachusetts to allegedly pay his mother.18 Debtor testified he is not currently paying any rent,19 yet he listed he pays $1,000 every month in rent expenses on his schedule J.20

There are no books or records of the Debtor's household expenses pre-petition,21 and he maintained no active bank account.22 According to the Debtor, he was "using cash exclusively."23 He would cash his paychecks rather than deposit them in a bank account, even borrowing a car to travel from Ormond Beach to Orlando to cash the checks.24 Debtor paid cash for his power bill,25 cell phone bill,26 water and trash bill,27 and property taxes.28 Although he could not estimate at trial the average amount of these bills,29 the Debtor listed specific amounts on his Schedule J.30 There is a $500 support payment in his Schedule J, but the Debtor stated that he had not made that payment for several years.31 The Court concludes the Debtor falsified the expenses in his Schedule J. He did not pay monthly rent ($1,000) or the support payment of $500.

Debtor says he operated exclusively in cash after another creditor garnished his bank account, and he wanted to avoid another garnishment.32 He did not like participating in the banking system and felt vulnerable with an open bank account.33 The testimony was that he had about $100,000 in cash about a year before his bankruptcy was filed that he used for living expenses, although the Debtor was not certain when he received the cash.34 He says this cash is exhausted but has no financial record to support this conclusion.35 In his schedules, the Debtor listed $1,000 in cash on hand and $4,000 in other personal property.36 Without financial records, the Court and creditors can only guess as to the Debtor's cash on the petition date.

Immediately after filing bankruptcy, Debtor reverted to using a checking account and debit card post-petition contending it now was more "convenient."37 Debtor received $150,000 post-petition from a wealthy friend. He says he used these monies to pay living expenses and fund extravagant vacations.38 So, after filing bankruptcy, the creditors can track his income and expenses; but pre-bankruptcy, creditors are in the dark on the Debtor's income, expenses, and assets.

The primary purpose of a Chapter 7 consumer bankruptcy case is to reward an honest debtor with a fresh start from all debts—a discharge.39 Courts construe objections to discharge liberally for the debtor and strictly against the objecting party.40 However, only those debtors who fully disclose their assets may receive a discharge.41 Early and complete disclosure by the honest debtor avoids extraordinary and unjustified work by Chapter 7 Trustees and creditors, who should not spend time recreating what "may" have happened to a debtor's assets.42

When a party objects to a debtor's discharge, the initial burden is on that party to prove the objection by a preponderance of the evidence.43 Once met, the burden shifts to the debtor to rebut the allegations.44 The Court focused on three of the Plaintiff's arguments: Debtor is precluded from discharging his debts because he failed to produce or to keep adequate financial records to allow his creditors to ascertain his true financial condition (§ 727(a)(3)), he knowingly or fraudulently made a false oath or account (§ 727(a)(4)(A)), and he failed to satisfactorily explain his loss of assets (§ 727(a)(5)).

Section 727(a)(3) provides a debtor should not receive a discharge if he or she fails to maintain adequate books and records from which the debtor's true financial condition can be ascertained.45 The purpose of § 727(a)(3) is to give creditors, the trustee, and the bankruptcy court, "complete and accurate information regarding the status of a debtor's affairs and to test the completeness of the [debtor's] disclosure."46 Giving truthful and complete financial books and records to the Chapter 7 Trustee is mandatory. Every trustee needs the information to administer the bankruptcy case, and this is a condition precedent to receiving a discharge.47 Courts have wide discretion in determining whether a debtor has maintained sufficient records.48 Each case should be determined on its own facts,49 and there should be some orderly records from which a debtor's financial condition can be deduced.50

Courts generally must decide whether the books and records produced by a debtor "are adequate to permit the court and creditors to trace the debtor's financial dealings."51 "While perfect record keeping is not required, the creditors examining the debtor's records `must be reasonably able to follow the debtor's business transactions, make intelligent inquiry, verify the oral statements and explanations of the bankrupt, and ascertain the present and past financial condition of the bankrupt [with] substantial completeness and accuracy.'"52

Section 727(a)(4)(A) provides that a debtor shall not receive a discharge where he "knowingly and fraudulently, in or in connection with the case, makes a false oath."53 The false oath must be both fraudulent and material.54 A false oath is material if it "bears a relationship to the bankrupt's business transactions or estate, or concerns the discovery of assets, business dealings, or the existence or disposition of his property."55 An omission from a debtor's schedules or statement of financial affairs, for example, can constitute a false oath under § 727(a)(4).56 After a plaintiff's initial burden is met, the burden shifts to the debtor to prove he did not knowingly and fraudulently make a material false oath.57

Section 727(a)(5)58 precludes a debtor's discharge where the debtor fails to explain a loss of assets.59 A plaintiff has the preliminary burden of demonstrating that the debtor "formerly owned substantial, identifiable assets that are now unavailable to distribute to creditors."60 Upon such a showing, debtors then must supply a satisfactory reason they no longer have the asset.61 "A [debtor's] general oral explanation for the disappearance of substantial assets without documentary corroboration" is not enough.62 Vague and indefinite explanations of losses are not sufficient.63

The Court attempted to parse through and piece together the Debtor's timeline of his employment history, his decision to operate in cash exclusively, and where his cash on hand went pre-petition. Credibility is often the key in determining the sufficiency of a debtor's explanation for lost assets and failing to keep any meaningful financial records. Here, the Court specifically finds that the Debtor's testimony was not credible. Debtor gave conflicting testimony and his timelines were often changed when pressed. Plaintiff provided enough evidence to draw a contrary conclusion to the Debtor's representations.64

Plaintiff carried its burden by a preponderance of the evidence to show that the Debtor failed to maintain books and records so his creditors could ascertain his financial condition, misreported his income and expenses on his bankruptcy schedules, and failed to explain his loss of identifiable and substantial cash.65 Debtor need not keep perfect financial records of what he spent his money on, but there is no credible record of where his money went, aside from the Debtor's waffling testimony.66 Creditors could not ascertain his true financial condition given the Debtor's failure.67 There was no way for creditors to intelligently inquire into the Debtor's financial condition.

Similarly, there was no way for creditors to confirm his statements because there was no record to back up his story. Debtor's general explanation he spent his $100,000 in cash savings on "living expenses" in a year is incredible,68 and there is no documentary corroboration to back up the Debtor's statements.

Debtor made a false oath by stating he paid certain expenses on his bankruptcy schedules and then testifying he did not pay those expenses (the Court disregarded the Debtor's testimony on his rent payments).69 Debtor also gave a false oath in listing his total income of $1,669 in 2016.70 The Court finds this false. The burden then shifted to the Debtor to explain what happened.

Debtor did not explain his failure to maintain accurate records of his financial history.71 Debtor may have wanted to avoid garnishment of his bank accounts,72 but then he may not come to the bankruptcy court and expect to discharge his debts. Debtor's explanation he "did not like" the banking system also did not hold weight with the Court. The Court finds it suspect that the Debtor operated in cash because of some moral opposition to banking, when immediately after filing bankruptcy, he opened a checking account and uses a debit card post-petition for "convenience."73

The Court suspects the Debtor had more cash on hand than he disclosed, especially given in the Debtor's last permanent job he earned a salary of $300,000.74 And, he is getting substantial unaccounted monies from friends and acquaintances.75 The Court finds the Debtor did not accurately report his expenses on his bankruptcy schedules—he did not pay his mother rent consistently to justify including a $1,000 expense and he did not pay his $500 support payment even though he included that as an expense.76 Again, the Court found the Debtor's testimony he made $1,669 in 2016 false. Although these figures may seem minimal, taken with all the other inconsistencies and incredible explanations, the Court finds the misstatements fraudulent and material. Debtor did not have a mortgage, did not pay rent (at least consistently), had no car payment, and had no other major expenses that would justify exhausting $100,000 in the year before his petition was filed when he owed his creditors money.

Discharges are reserved for honest but unfortunate debtors. Debtor is not honest or unfortunate, and his discharge is denied. The oral ruling scheduled for April 17, 2018, is cancelled. A separate final judgment consistent with this memorandum opinion will be entered simultaneously.