Bankruptcy

Destroyed Documents leads to Denial of Discharge

By Bill McLeod, Esq.

Thinking about filing bankruptcy? Do you have a paper shredder or know a friend with a dumpster? You should know that a US Bankruptcy Court judge in Boston recently ruled that a Chapter 7 debtor was not entitled to a discharge because documents had been destroyed.

The case involved a carpenter and homebuilding contractor who operated under a corporate entity. The corporation had employees and handled large projects involving hundreds of thousands of dollars. While perhaps a good contractor, the debtor was not a savvy business person but that did not stop him from being the record keeper for the company.

The business records were kept in a large plastic bin which included canceled checks, copies of contracts and even some personal records. He did not maintain a cash flow ledger for the company.

In 2004, the company started to face cash flow problems which eventually snowballed. He and his company were forced to abandon projects they had been paid on and he expected to be sued. The debtor consulted a bankruptcy attorney. By 2005, the debtor became seriously depressed about the company?s financial problems so much so that the mere site of the plastic bin made him sick. The Court noted that ?sometime between December 2004 and February 2005, he relieved himself of this immediate problem by driving the bin to, and depositing it in, a dumpster belonging to a roofing contractor friend.?

Full post as published by McLeod Law Offices on January 15, 2008 (boomark / email).