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Question: I filed an individual Chapter 7 bankruptcy. On Schedule D, I listed a Stock Pledge Agreement, pledging shares that I own in a small business. The agreement is essentially a credit line for $100,000 and I listed that value of $100,000 under "amount of claim" column and Unknown under the "unsecured portion". At the date of petition, I had drawn down $25,000 from the credit line. During the 341a meeting, a creditor asked how much I had drawn from the credit line and I testified that it was $25,000.That creditor later filed an adversarial complaint alleging among other things that the listing of the credit line for the full value of $100,000 on my bankruptcy schedule when I had only drawn down $25,000 constitutes a false oath per 727(a)(4) and is seeking to deny my discharge. Notwithstanding that the creditor must show I had intent to deceive and that it is material to the bankruptcy, or somehow prejudiced by it, I don't believe that that way the debt was scheduled was even false in the first place. I certainly didn't want to understate the debt, and when asked during the 341a meeting, I immediately disclosed the actual balance. Is there a statue, case law or some other reference that I can cite that affirms this? i.e.
Response 1: There is no Statute on point. However, you can cite the fraudulent transfer and obligation Statute, 11 U.S.C. Section 548(a)(1)(A) which requires the trustee to avoid a transfer or obligation
"if the debtor voluntarily or involuntarily--
(A) made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted..."
What is the proper way to schedule a credit line that I still may draw on post-petition?
Response 2: The outstanding loan on the credit line, the amount that you withdrew plus interests. This is similar to the way that you would list a credit card. Even if you have a credit limit of $10,000.00 for instance, but you have only charged $5,000.00 on the card, you would only list the $5,000.00 plus interests. So, the amount that is listed is the drawdown amount plus interests. However, this is something that you could amend. This not a serious issue that would make the court to deny you a discharge. This is an honest mistake.
The creditor that filed the Adversary Proceeding is really grasping at straw here. Even if the Court were to find that you were only supposed to list the amount of the drawdown, that in of itself does not constitute false oath. You listed your creditor and the amount owed to the best of your ability. If you made a mistake in listing the amount, that can be easily corrected by amending Schedule D. Also and more importantly, you told the truth in your Section 341 Meeting--you disclosed the amount of drawdown in your Section 341 Meeting. I do not see a false oath or fraudulent intent here.
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