United States Court of Appeals 

For the First Circuit 

No. 15-9005 

IN RE MICHAEL J. SIMMONS, 

Debtor. 

___________________ 

WILLIAM K. HARRINGTON, 

Trustee, Appellee,

v. 

MICHAEL J. SIMMONS, 

Debtor, Appellant. 

APPEAL FROM THE BANKRUPTCY APPELLATE PANEL 

FOR THE FIRST CIRCUIT 

Before 

Lynch, Circuit Judge, 

Souter,* Associate Justice, 

and Selya, Circuit Judge. 

 James P. Ehrhard for appellant. 

 Sumi K. Sakata, Trial Attorney, with whom Ramona D. Elliott, 

Deputy Director/General Counsel, Executive Office for United 

States Trustees, U.S. Department of Justice, P. Matthew Sutko, 

Associate General Counsel, William K. Harrington, United States 

Trustee, and Richard T. King, Assistant United States Trustee, 

were on brief, for appellee. 
January 20, 2016 

__________ 

 *Hon. David H. Souter, Associate Justice (Ret.) of the Supreme 

Court of the United States, sitting by designation. 

 
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SELYA, Circuit Judge. In exchange for a fresh start, a 

debtor must paint a basic picture of his financial condition and 

satisfactorily explain the disposition of his assets during the 

period leading up to the filing of his bankruptcy petition. Here, 

the bankruptcy court pronounced the debtor's lack of documentation 

"shocking and disturbing" and found that he had not satisfactorily 

explained the disposition of his assets. Consequently, the court 

denied the debtor a discharge. The Bankruptcy Appellate Panel for 

the First Circuit (the BAP) upheld this decision. See Harrington 

v. Simmons (In re Simmons), 525 B.R. 543, 549 (B.A.P. 1st Cir. 

2015). After careful consideration, we affirm. 

I. BACKGROUND 

In chapter 7 liquidation proceedings, an individual 

debtor may receive a discharge that absolves him from virtually 

all debts that arose before the bankruptcy case commenced.1 See 

11 U.S.C. § 727(a). Nevertheless, certain behavior may preclude 

the granting of a discharge. Two types of preclusive behavior are 

relevant here. For one thing, the bankruptcy court may deny a 

discharge if: 

the debtor has concealed, destroyed, mutilated, 

falsified, or failed to keep or preserve any recorded 

information . . . from which the debtor's financial 

condition or business transactions might be ascertained, 

 

 1 We say "virtually" because certain debts, excepted by statute, 

are non-dischargeable. See 11 U.S.C. § 523(a). This case does 

not require us to delve into these exceptions. 
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unless such act or failure to act was justified under 

all of the circumstances of the case . . . . 

Id. § 727(a)(3). For another thing, the bankruptcy court may deny 

a discharge if: 

the debtor has failed to explain satisfactorily, before 

determination of denial of discharge under this 

paragraph, any loss of assets or deficiency of assets to 

meet the debtor's liabilities . . . . 

Id. § 727(a)(5). 

In chapter 7 proceedings, the United States Trustee (the 

Trustee) may be heard on any issue. See id. § 307; see also In re 

Youk-See, 450 B.R. 312, 323 (Bankr. D. Mass. 2011) (explaining 

that the Trustee "protect[s] the integrity of the bankruptcy 

system"). The Trustee is specifically authorized to object to the 

granting of a discharge in a chapter 7 case. See 11 U.S.C. 

§ 727(c)(1). 

Against this statutory backdrop, we proceed to the case 

at hand. Michael J. Simmons (the debtor) became involved in the 

real estate business around 1997. He left college before 

completing his degree to work in the real estate business with an 

individual named Kai Kunz. The debtor initially helped fund Kunz's 

own real estate investments but, by around 2006, he was identifying 

properties to purchase for his own account, obtaining financing, 

and hiring property managers. By 2007, he had acquired 27 rental 

properties in communities throughout Massachusetts. 
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For aught that appears, the debtor took title to the 

properties in his own name and signed all the pertinent loan 

documents. He hired managers to oversee the properties and collect 

rents. At least some of the rents were deposited into accounts 

maintained by the debtor or his managers, but the accounts were 

never segregated by tenant. Overall, the properties generated 

rents that appear to have been the debtor's sole source of income. 

On November 15, 2010, the debtor filed a chapter 7 

bankruptcy petition, seeking to discharge, inter alia, nearly 

$3,500,000 in unsecured debt. In due course, the debtor filed his 

schedules of assets and liabilities and his statement of financial 

affairs. These filings revealed that the debtor by then retained 

an interest in only five properties (all of which he intended to 

surrender to lenders). The vast majority of the debtor's unsecured 

debt was described as deficiencies on various mortgages or 

deficiencies arising after the foreclosure of multiple properties. 

The filings also showed that the debtor was unemployed, that he 

reportedly had no income from 2008 to 2010, and that he depended 

on family members for support. His bank account balances were 

close to zero, and he disclaimed possession of any other assets of 

value. 

The Trustee requested that the debtor furnish further 

documentation relating to his real estate holdings and his overall 

financial condition (including bank account statements, canceled 
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checks, and state and federal income tax returns). In response, 

the debtor produced copies of his federal tax returns for the years 

2007, 2008, and 2009. Each return reflected income and loss from 

only one property. No information pertaining to other rental 

properties was produced. 

When the Trustee later deposed the debtor, he discovered 

that the debtor had owned a total of 27 separate rental properties 

during the years immediately preceding the filing of his bankruptcy 

petition. The debtor professed an inability to recall any 

meaningful detail regarding the disposition of his rental income. 

He testified that 22 of the properties had been transferred through 

short sales or foreclosures prior to his filing for bankruptcy, 

but he did not provide any details about the ultimate disposition 

of these properties. 

Following the deposition, the Trustee again demanded 

that the debtor produce rent rolls and ledgers showing how much 

rent he had collected, together with documentation explaining 

where the collected rents and his other assets had gone. The 

debtor provided no responsive documents, and several more document 

requests also went begging. 

Frustrated by this apparent stonewalling, the Trustee 

instituted an adversary proceeding against the debtor, seeking to 

deny him a discharge. In due season, the Trustee moved for summary 

judgment. At that point, the debtor surrendered some additional 
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records — but this document dump was disorganized and omitted the 

most critical information sought by the Trustee. No rent rolls, 

ledgers, bank statements, or other records showing itemized 

accounts of either rental proceeds or real estate transactions 

were forthcoming. Withal, the debtor opposed summary judgment 

arguing that he had given the Trustee all the documents that he 

either possessed or could reasonably obtain. 

The Trustee pressed his summary judgment motion. The 

bankruptcy court granted the Trustee's motion and denied a 

discharge on two grounds: it concluded that the debtor had violated 

both 11 U.S.C. § 727(a)(3) and 11 U.S.C. § 727(a)(5). When the 

debtor appealed, the BAP upheld the denial of the discharge on 

both grounds. See In re Simmons, 525 B.R. at 549. This timely 

second-tier appeal ensued. 

II. ANALYSIS

A two-tiered framework exists for appellate review in 

bankruptcy cases: 

Under this framework, litigants in the ordinary case 

must first appeal to the district court (or, in some 

circuits, a bankruptcy appellate panel). See 28 U.S.C. 

§ 158(a)-(b); Brandt v. Repco Printers & Lithographics, 

Inc. (In re Healthco Int'l, Inc.), 132 F.3d 104, 107 

(1st Cir. 1997). The courts of appeals are then 

available as a second tier of appellate review. See 28 

U.S.C. § 158(d)(1); Stornawaye Fin. Corp. v. Hill (In re 

Hill), 562 F.3d 29, 32 (1st Cir. 2009). 

City Sanit., LLC v. Allied Waste Servs. of Mass., LLC (In re Am. 

Cartage, Inc.), 656 F.3d 82, 87 (1st Cir. 2011). "We accord no 
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special deference to determinations made by the first-tier 

appellate tribunal but, rather, train the lens of our inquiry 

directly on the bankruptcy court's decision." Wheeling & Lake 

Erie Ry. Co. v. Keach (In re Montreal, Me. & Atl. Ry., Ltd.), 799 

F.3d 1, 5 (1st Cir. 2015). We afford de novo review to that 

decision. See Razzaboni v. Schifano (In re Schifano), 378 F.3d 

60, 66 (1st Cir. 2004). 

Federal Rule of Bankruptcy Procedure 7056 incorporates 

Federal Rule of Civil Procedure 56 as the mechanism for 

adjudicating summary judgment motions. The moving party (here, 

the Trustee) must show that "there is no genuine dispute as to any 

material fact and [he] is entitled to judgment as a matter of law." 

Fed. R. Civ. P. 56(a). Within this rubric, an issue is "genuine" 

"if the record permits a rational factfinder to resolve that issue 

in favor of either party." Jarvis v. Vill. Gun Shop, Inc., 805 

F.3d 1, 7 (1st Cir. 2015). A fact is "material" "if its existence 

or nonexistence has the potential to change the outcome of the 

suit." Id. (quoting Borges ex rel. S.M.B.W. v. Serrano-Isern, 605 

F.3d 1, 5 (1st Cir. 2010)). Establishing a genuine issue of 

material fact requires evidence that is "significantly probative." 

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986). 

"[C]onclusory allegations, improbable inferences or unsupported 

speculation" will not suffice. In re Schifano, 378 F.3d at 66. 
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With respect to issues on which the non-movant would 

bear the burden of proof at trial, the non-movant (here, the 

debtor) must adduce sufficient evidence to permit the trier of 

fact to resolve that issue in his favor. See Serrano-Isern, 605 

F.3d at 5. If the non-movant fails to make the required showing 

on such an issue and the issue is a dispositive one, summary 

judgment is appropriate. See id. 

We turn now from the general to the specific. In 

granting summary judgment, the bankruptcy court determined that 

the undisputed facts established two separate and independently 

sufficient grounds for denying the debtor a discharge. We examine 

each ground separately, mindful that the bankruptcy court's 

judgment should be upheld so long as either ground is valid. See 

Beaubouef v. Beaubouef (In re Beaubouef), 966 F.2d 174, 177 (5th 

Cir. 1992). 

A. 11 U.S.C. § 727(a)(3).

We start with 11 U.S.C. § 727(a)(3). Every debtor has 

a duty to maintain books and records accurately memorializing his 

business affairs. See Peterson v. Scott (In re Scott), 172 F.3d 

959, 969 (7th Cir. 1999). Section 727(a)(3) operates in 

furtherance of this duty: by virtue of the statute, a bankruptcy 

court may deny a discharge to a debtor who has failed to "keep or 

preserve" adequate business records "from which the debtor's 

financial condition or business transactions might be 
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ascertained." Congress's evident purpose in enacting section 

727(a)(3) was to give interested parties and the court a reasonably 

complete picture of the debtor's financial condition during the 

period prior to bankruptcy. See Tucker v. Devine (In re Devine), 

11 B.R. 487, 488 (Bankr. D. Mass. 1981). 

A party who desires to invoke section 727(a)(3) must 

make a prima facie showing that the debtor has failed to maintain 

adequate records. See CM Temp. Servs., Inc. v. Bailey (In re 

Bailey), 375 B.R. 410, 415 (Bankr. S.D. Ohio 2007). Record-keeping 

need not be precise to the point of pedantry: records can be 

adequate without being textbook models. The operative standard is 

functional: a debtor's records must "sufficiently identify the 

transactions [so] that intelligent inquiry can be made of them." 

In re Schifano, 378 F.3d at 69 (quoting Meridian Bank v. Alten, 

958 F.2d 1226, 1230 (3d Cir. 1992)) (alteration in original). The 

standard is an objective one. A debtor's records may be judged 

deficient under section 727(a)(3) even if the debtor did not intend 

to conceal financial information, see State Bank of India v. Sethi 

(In re Sethi), 250 B.R. 831, 837 (Bankr. E.D.N.Y. 2000), or 

harbored an honest belief that he did not need to keep records, 

see Miller v. Pulos (In re Pulos), 168 B.R. 682, 692 (Bankr. D. 

Minn. 1994). 

Here, the debtor kept virtually no records in connection 

with his 27 income-producing properties. The gaps in documentation 
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are as pervasive as they are disturbing. There is a total absence 

of information regarding the amount of rent the debtor received 

each month; a dearth of bank statements tracing the flow of rent 

proceeds; and a general absence of documentation regarding income 

earned from or expenses paid in connection with any of the debtor's 

properties. There is a similar lack of documentation concerning 

the acquisition, financing, and disposition of the properties. 

What records there are do not permit intelligent inquiry into the 

debtor's finances. Indeed, it is fair to characterize the debtor's 

real estate dealings as a black hole. 

Faced with this black hole, the debtor does not gainsay 

his failure to maintain adequate business records. Nor does he 

assert that he supplied sufficient documentation from which the 

Trustee might have ascertained his financial condition. Rather, 

his sole argument is that his failure to keep and preserve records 

was justified by extenuating circumstances. This is a 

justification defense, and we treat it as such. 

To be sure, section 727(a)(3) explicitly allows for a 

justification defense; and there are some situations in which 

courts have found a debtor's failure to keep and preserve records 

justified. See, e.g., Lansdowne v. Cox (In re Cox), 41 F.3d 1294, 

1298-1300 (9th Cir. 1994) (upholding finding of justification when 

debtor-wife reasonably relied on husband to keep records); Floret, 

L.L.C. v. Sendecky (In re Sendecky), 283 B.R. 760, 764 (B.A.P. 8th 
- 12 - 

Cir. 2002) (upholding finding of justification for incomplete 

records because debtor was poorly educated, unsophisticated, and 

had little business experience); Hunter v. Kinney (In re Kinney), 

33 B.R. 594, 596-97 (Bankr. N.D. Ohio 1983) (finding justification 

where debtor's records were "irretrievably lost" through no fault 

of his own). But the debtor has the burden of proving 

justification, see Meridian Bank, 958 F.2d at 1234, and his ability 

to prevail on such a defense turns on whether his asserted 

justification is objectively reasonable, see In re Schifano, 378 

F.3d at 68. The standard is that of a reasonably prudent person 

in the same or similar circumstances. See Meridian Bank, 958 F.2d 

at 1231. 

Myriad factors may inform this inquiry, including the 

debtor's education, experience, and sophistication; the volume and 

complexity of the debtor's business; and whatever other 

circumstances are made relevant by the idiosyncrasies of the case. 

See id. at 1231. 

In this instance, the bankruptcy court concluded that 

the relevant factors militated strongly against a finding that the 

debtor had acted as a reasonably prudent real estate owner. It 

noted that the debtor was an experienced investor who had some 

college education. He had left college for the specific purpose 

of working in the real estate business with Kunz and had branched 

out from there. He had been dealing in real estate for several 
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years. The volume of his business was substantial: he had amassed 

a total of 27 properties. Importantly, he had borrowed millions 

of dollars to finance the acquisition of properties. And at any 

rate, the debtor's status as a taxpayer and borrower presumably 

compelled him to keep such records. 

Given these historical facts, we think it nose-on-theface plain that any reasonable property owner would have kept and 

preserved documentation detailing income, expenses, and property 

dispositions. The debtor's only asserted justification for 

failing to keep even the most rudimentary financial records is 

that he "was nothing more than a dupe for managers (such as Kai 

Kunz)" and "he was manipulated and victimized by those who created 

and controlled the documentation." But these bald assertions 

(proffered without any specifics) are not enough to relieve the 

debtor of responsibility for his abject record-keeping.2 After 

all, "factually unsupported claims [and] defenses" are 

insufficient to withstand summary judgment. Celotex Corp. v. 

Catrett, 477 U.S. 317, 323-24 (1986); see Aponte-Rosario v. 

Acevedo-Vilá, 617 F.3d 1, 12 (1st Cir. 2010) (explaining that 

 

 2 At oral argument in this court, the debtor suggested that a 

trial would have fleshed out these assertions. But the record 

offers no indication that the debtor made any effort to undertake 

discovery. Nor did he request that the bankruptcy court postpone 

adjudication of the summary judgment motion until he could obtain 

more information. See Fed. R. Civ. P. 56(d). The case law makes 

clear that such inaction has consequences. See Nieves-Romero v. 

United States, 715 F.3d 375, 382 (1st Cir. 2013).
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"general allegations" lacking specificity cannot survive summary 

judgment). 

The debtor's unsupported claim that he was a "dupe" does 

not save the day. A debtor cannot shirk his statutory duty under 

section 727(a)(3) by the simple expedient of claiming conclusorily 

that he was merely a pawn for someone else. At least in the 

absence of proof of special circumstances (not present here), such 

a claim is not an objectively reasonable justification for a 

commercial property owner's failure to keep and maintain any 

semblance of adequate records.3

That ends this aspect of the matter. We hold, without 

serious question, that even when the facts of record are taken in 

the light most hospitable to the debtor, they do not form a 

predicate sufficient to allow him to carry his burden of proving 

justification. The debtor argues that such a holding amounts to 

a rule of strict liability for a failure to keep and preserve 

records. That argument is misguided. We hold only that a 

discharge may be denied where, as here, the debtor fails, without 

any objectively reasonable justification, to keep and preserve 

records. 

 

 3 In all events, the debtor's claim that he was a "dupe" is 

open to serious question. For example, he was able to name each 

of the 27 properties (citing street addresses and facts concerning 

mortgage financing). 
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To say more would be to paint the lily. It follows from 

what we already have said that the bankruptcy court's entry of 

summary judgment and its concomitant denial of a discharge based 

on 11 U.S.C. § 727(a)(3) was appropriate. 

B. 11 U.S.C. § 727(a)(5).

The second ground that underlies the bankruptcy court's 

decision is equally firm. Section 727(a)(5) authorizes the 

bankruptcy court to deny a discharge when a debtor has experienced 

a loss of assets or some other deficiency that the debtor cannot 

satisfactorily explain. See Aoki v. Atto Corp. (In re Aoki), 323 

B.R. 803, 817 (B.A.P. 1st Cir. 2005). A burden-shifting framework 

applies: if the party seeking to thwart a discharge shows that the 

debtor has not accounted for previously owned assets or previously 

earned income, the burden shifts to the debtor to explain the 

deficiency. See id. The debtor's explanation "must be supported 

by at least some corroboration," and it "must be sufficient to 

eliminate the need for any speculation as to what happened to all 

of the assets." Id. Something more than vague allusions is 

required. See id. 

To invoke section 727(a)(5), it is unnecessary to show 

that the debtor has acted fraudulently or in bad faith. See id. 

Rather, the issue turns on whether a satisfactory explanation is 

— or is not — forthcoming. 
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In this case, the Trustee plainly carried his initial 

burden. First, he showed that numerous pieces of property, once 

owned by the debtor, are no longer included in his schedule of 

assets. Second, he showed that the rents from those properties 

had not been accounted for. The record demonstrates that the 

debtor owned 27 income-producing properties; that he received rent 

from at least some of these properties in the two years leading up 

to his bankruptcy filing; and that he could not account for either 

the disposition of the 22 properties that he no longer owns or his 

rental income. 

Given this prima facie showing, the burden shifted to 

the debtor to explain his loss of assets. The bankruptcy court 

found that the debtor had wholly failed to account for either the 

disposition of the properties that he formerly had owned or for 

the rental income that his properties had generated. Moreover, 

the court found that the debtor had not offered any coherent 

explanation for the dissipation of his assets. The hodge-podge of 

records that the debtor ultimately provided were not only unlabeled 

and disorganized but also proved inadequate to illuminate any of 

the relevant issues. 

The bankruptcy court's findings are unimpugnable. The 

debtor has never submitted anything remotely resembling a 

satisfactory explanation for the loss of millions of dollars in 

assets. 
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In an effort to paper over the lack of a satisfactory 

explanation, the debtor once again asserts that he was a mere 

"dupe" who produced all the information in his possession. This 

assertion provides no explanation at all, much less one that would 

satisfy the strictures of section 727(a)(5). We — like the courts 

below — are left entirely in the dark as to what happened to the 

debtor's considerable assets. We hold, therefore, that the 

bankruptcy court did not err in granting the Trustee's motion for 

summary judgment and thus denying the debtor a discharge under 11 

U.S.C. § 727(a)(5). 

III. CONCLUSION 

We need go no further. A debtor need not keep and 

preserve meticulously detailed records in order to secure a 

discharge in bankruptcy. Nor must a debtor provide an infinitely 

detailed explanation of where his money and property have gone. 

But the debtor must keep and preserve records containing enough 

information to paint a reasonably clear picture of his finances 

during the period leading up to the filing of his bankruptcy 

petition. He also must offer some satisfactory explanation for 

apparent losses and deficiencies. In this case, the debtor has 

not been able to cross this low threshold — and he has offered no 

legally objectively reasonable justification for his failure. 

Affirmed.