Jones v. U.S. Trustee

A fraud that would have served as grounds for denial of discharge of debt is also grounds for the revocation of discharge of debt if the trustee did not know of the fraud at the time of the discharge.

Jerry Jones filed Chapter 7 bankruptcy and was discharged of his debt. The United States Trustee (the
“Trustee”) subsequently learned Jones misrepresented himself in the bankruptcy proceedings by omitting assets he owned. The Trustee then moved to revoke the discharge of debt. The bankruptcy court held that the Trustee could revoke Jones’ discharge of debt pursuant to 11 U.S.C. § 727(d)(1) which allows for the revocation of the discharge of debt, only if the discharge was caused by the debtors fraud. The district court affirmed. Jones argued that the district court incorrectly applied § 727. Jones purports that his fraud, concealing assets, did not directly lead to the discharge of debt, and therefore the revocation of the discharge of debt should not be allowed. In sum, Jones asserts that since the Trustee never showed the misrepresentation caused the discharge of debt, the Trustee cannot revoke its discharge. However, the Ninth Circuit held that the revocation of the discharge of debt was proper. In its finding, the panel relied on the Bankruptcy Appellate Panel’s (“BAP”) holdings that any false oaths made by a debtor allow the court to deny a discharge. The panel also relied upon the holding in In re Nielson that clarified the fraud must be the but-for cause of a discharge in order to revoke it under § 727(d)(1). The panel concluded that the bankruptcy court correctly found Jones’ misrepresentations were the but-for cause of the discharge because they found the misrepresentations were material under the Rex analysis. Therefore, the Trustee was allowed to revoke the discharge of Jones’ debt because Jones made material fraudulent representations in the bankruptcy proceedings. AFFIRMED.