Opinion ID: 63408
Heading Depth: 3
Heading Rank: 2

Heading: Inadequate Records

Text: Cadle also asserts that discharge was improper because the Orsinis did not comply with their duty to maintain and produce adequate records in accordance with 11 U.S.C. § 727(a)(3). Section 727(a)(3) allows the court to deny discharge if the debtor “has concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information, including books, documents, records, and papers, from which the debtor’s financial condition or business transactions might be ascertained, unless such act or failure to act was justified under all of the circumstances of the case.” Id. The plaintiff bears the initial burden of proving that the debtor’s financial records are inadequate and that this failure prevented the plaintiff from ascertaining the debtor’s financial condition. Robertson v. Dennis (In re Dennis), 330 F.3d 696, 703 (5th Cir. 2003). Although a debtor’s financial records need not contain full detail, there should be written evidence of the debtor’s financial condition. Id. If the records are inadequate, the burden shifts to the debtors to show the inadequacy is justified under all of the circumstances. Id. A bankruptcy court has “wide discretion” in making these findings, which we review for clear error. Id. Here, the bankruptcy court determined that the numerous documents produced by the Orsinis formed an adequate picture of the Orsinis’ financial condition prior to their bankruptcy. We cannot say that this was clear error. First, as the district court noted, our ability to scrutinize this finding is complicated by the fact that many of the financial documents the Orsinis supplied to Cadle — including their tax returns and certain bank account statements — were not made a part of the record. Because Cadle bears the burden of proof, the absence of these documents undermines its claim. Second, Cadle’s heavy reliance on our unpublished opinion in Cadle Co. v. Terrell is unpersuasive. 46 F. App’x 731, 2002 WL 1973217 (5th Cir. July 30, 2002). In Terrell, the debtor failed to produce any credit card or bank 8 No. 07-40450 statements, and an expert witness testified that the available records were insufficient to understand the debtor’s financial condition in the years preceding the bankruptcy. See No. 4:01-CV-0399, 2002 WL 22075, at -5 (N.D. Tex. Jan. 7, 2002). In contrast, the Orsinis produced three boxes of documents, including bank statements and credit card information, and later provided additional materials in response to Cadle’s specific requests. Further, Cadle offered no testimony specifying which, if any, of the missing documents prevented it from ascertaining the Orsinis’ financial condition. Third, while the extent of a debtor’s records should be commensurate with his or her financial sophistication, the bankruptcy court did not clearly err in finding that the Orsisnis were not so sophisticated as to require imposition of a higher-than-average standard of record keeping. Rebecca worked as a stockbroker for a period of time, but her degree was in elementary education. Prior to opening Foxglove, she had no experience running a business. Anthony has a degree in finance, but his employment had been primarily technical and computer-oriented. We affirm the bankruptcy court’s finding that discharge should not be denied under 11 U.S.C. § 727(a)(3).