               United States Bankruptcy Appellate Panel
                           FOR THE EIGHTH CIRCUIT



                                       No. 11-6055


In re:                                      *
                                            *
Jay Freese,                                 *
                                            *
         Debtor.                            *
                                            *
Lincoln Savings Bank,                       *        Appeal from the
                                            *        United States
         Plaintiff-Appellee,                *        Bankruptcy Court for the
                                            *        Northern District of Iowa
               v.                           *
                                            *
Jay Freese,                                 *
                                            *
         Defendant - Appellant.             *


                               Submitted: November 18, 2011
                                 Filed: December 14, 2011



Before SCHERMER, VENTERS and SALADINO, Bankruptcy Judges

SCHERMER, Bankruptcy Judge
       The Debtor, Jay Freese (the “Debtor”), appeals from the ruling of the
bankruptcy court1 denying his discharge pursuant to 11 U.S.C. §727(a)(4).2 We have
jurisdiction over this appeal from the final judgment of the bankruptcy court. See 28
U.S.C. § 158(b). For the reasons set forth below, we affirm.

                                    ISSUE
     The issue on appeal is whether the bankruptcy court properly denied the
Debtor’s discharge under §727(a)(4)(A).

                                 BACKGROUND
       On September 10, 2009, the Debtor filed a voluntary petition for relief under
Chapter 7 of Title 11 of the United States Code (the “Bankruptcy Code”). The
Debtor’s Schedules and Statement of Financial Affairs were signed under oath and
have not been amended. The Debtor listed one unsecured creditor and two secured
creditors, one of which is the Appellee, Lincoln Savings Bank (the “Bank”).

      The Bank brought an action seeking to deny the Debtor’s discharge based on,
among other things, the making of a false oath in connection with numerous
inaccurate statements made in his Schedules and Statements. In summary, the Bank
produced evidence that the Debtor failed to disclose in his Schedules and Statements


      1
            The Honorable Paul J. Kilburg, United States Bankruptcy Judge for
the Northern District of Iowa.
      2
              In his Notice of Appeal, the Debtor also indicates that he appeals
from “any other preliminary orders therein, entered in this adversary proceeding
on the 30th day of June, 2011, docket number 38 and docket number 39.” The only
issue that the Debtor discussed in his briefs and at oral argument was the denial of
his discharge under §727(a)(4), and this Court will consider any additional bases
for appeal to be abandoned. We note that in the bankruptcy court, the Bank also
sought denial of the Debtor’s discharge under §§727(a)(2), (3) and (5), but the
bankruptcy court denied the Debtor’s discharge under only §727(a)(4).
                                         -2-
and failed to satisfactorily explain the omissions of: (1) the existence of the Debtor’s
livestock business; (2) the gross income from his livestock business; (3) over $25,000
of income from 2007; (4) transfers of two ATVs, a bobcat and a tractor; and (5) co-
ownership of the car his wife drives.

        According to the Bank, the Debtor provided false answers in response to
Questions 1 and 18 on his Statement of Financial Affairs. Question 1 requires a
debtor to “[s]tate the gross amount of income the debtor has received from
employment, trade, or profession, or from the operation of the debtor’s business. . .”
 It requires this information for the calendar year when the bankruptcy petition was
filed, and for the two years immediately preceding that calendar year. In response to
Question 1, the Debtor included only income from his employment at USS Polaris,
although he admitted in the parties’ Joint Pre-Trial Statement that “[d]uring the two
years and nine months prior to the debtor’s filing of bankruptcy he engaged in a sole
proprietorship under which he purchased and sold hogs.” The Debtor’s farming
operations had gross income of $491,637 in 2007, and its expenses were $592,358
that year. The farming operations also operated at a loss in 2008, but it had gross
income of $800,103 and expenses of $917,756.

       The Debtor testified at the trial. He explained that he had a difficult time filling
out the bankruptcy Schedules and Statements and claims that he did the best that he
could, but that he read too much into the questions. He also explained that he was not
attempting to mislead, conceal or defraud anyone and that he believes he answered
the question on his Schedules and Statements correctly. At the same time, the Debtor
has acknowledged that his Schedules and Statements do not disclose the following
income for 2007: (a) $21,014 from First Choice Livestock LLC; and (b) $4,050 from
Unique Swine System Inc.

      The Debtor testified that he thought Question 1 on the Statement of Financial
Affairs was asking for income that he made over his expenses. His understanding

                                            -3-
was that gross income was the amount if you make money and because he did not
make money on his hog business, there was nothing for him to report. However,
when asked about gross income from his employment at USS Polaris, the Debtor
explained that he reported the amount he was paid before he paid his expenses, and
the bankruptcy court found that with respect to his income from USS Polaris, “Debtor
recognized that gross income was total income and net income was the actual amount
he got paid.” In addition, the Debtor acknowledged that his hog operation had
existed since 2002 and that it had nearly $2 million in sales. The Debtor explained
that the $21,014 he received in 2007 from First Choice Livestock LLC represented
a refund of his prepayment for medicine and additives for pigs. Prior to 2007, he had
been a member of First Choice Livestock LLC. On appeal, the Debtor admitted that
he simply forgot to disclose the $4,050 of income in 2007 from Unique Swine System
Inc., a pig broker business for which the Debtor had worked in sales. The Debtor had
also worked in sales for another company.

       In response to Question 18 on the Statement of Financial Affairs, requesting
information about a debtor’s businesses within six years before the bankruptcy filing,
the Debtor indicated “None.” When asked about his hog business and farming, he
explained that farming was not a business in his case and that “this was like hobby
farming,” and noted that he had no land and rented all his buildings. The Debtor
acknowledged, however, that in his 2007 U.S. Form 1040, he listed his occupation
as “livestock manager.”

       The Statement of Financial Affairs also asks a debtor to disclose for the two
years prior to the filing of the case “all other property, other than property transferred
in the ordinary course of the business or financial affairs of the debtor, transferred
either absolutely or as security.” The Debtor’s Schedules and Statements do not
include certain pre-petition transfers of property by the Debtor of equipment that he
admittedly used at least some of the time in his hog business. The Debtor testified
that within two years before he filed his bankruptcy petition, he sold a Bobcat S175

                                           -4-
and a Kubota tractor loader and put the proceeds in his retirement account. He traded
a Polaris 700 ATV and a Polaris Ranger ATV with his employer for a corn stove. In
finding that these items constituted a part of the Bank’s collateral, the bankruptcy
court relied upon the Commercial Security Agreement dated July 19, 2007, which
gave the Bank a security interest in “Equipment,” which was defined as: “Equipment:
All equipment including, but not limited to, machinery, vehicles, furniture, fixtures,
manufacturing equipment, farm machinery and equipment, shop equipment, office
and record keeping equipment, parts and tools.” The Debtor testified, however, that
he did not think the Bank took any collateral for its loan.3 He also claimed that the
sales and transfer of the equipment were all made in the ordinary course of his
financial affairs and did not need to be reported.

       Unfortunately, the Debtor has not provided a copy of the security agreement
to us and, therefore, he has not rebutted the bankruptcy court’s finding that the Bank
had a security interest in the Bobcat S175, Kubota tractor loader, Polaris 700 ATV
and Polaris Ranger ATV.

      In his Schedules, the Debtor failed to disclose his ownership of a 2003 Ford
Explorer that he held jointly with his wife. At trial, he acknowledged that he had an
ownership interest in the vehicle based on the title, but testified that he did not
disclose it on his schedules because it was his wife’s. The Debtor testified that he did
not use a bookkeeper and that he was in possession of his books and records. He
provided a copy of information about his business operations to a third-party only for
the purpose of preparing his tax returns.

      The Debtor explained that he gave the Chapter 7 trustee all the paperwork she
requested, that he answered her questions fully at his meeting of creditors, that his
paperwork was transparent about his farm operation and that he also gave paperwork

      3
            The Debtor’s Schedules listed the property subject to the Bank’s lien
as “Checks from Tyson Foods representing proceeds of livestock.”
                                          -5-
about his farm operations to the Bank. He also noted that the trustee did not ask him
to amend his Schedules and Statements after the §341 meeting. He maintains that all
of the necessary information was disclosed.

                           STANDARD OF REVIEW
       We review findings of fact for clear error and conclusions of law de novo.
Korte v. Internal Revenue Serv. (In re Korte), 262 B.R. 464, 469 (B.A.P. 8th Cir.
2011) (citations omitted). “A finding is ‘clearly erroneous' when although there is
evidence to support it, the reviewing court on the entire evidence is left with the
definite and firm conviction that a mistake has been committed.” Anderson v. City
of Bessemer City, 470 U.S. 564, 573 (1985) (quoting United States v. U.S. Gypsum
Co., 333 U.S. 364, 395 (1948)). We give due regard to the bankruptcy court’s
opportunity to judge the credibility of witnesses. Fed. R. Bankr. P. 8013.

                                    DISCUSSION
       Denial of a discharge is a harsh remedy and, accordingly, the provisions under
§727 of Title 11 of the United States Code (the “Bankruptcy Code”) “are strictly
construed in favor of the debtor.” See Korte, 262 B.R. at 471 (quoting Fox v. Schmidt
(In re Schmidt), 71 B.R. 587, 589-90 (Bankr. D. Minn. 1987)). To prevail in an
action to deny a debtor’s discharge, the objecting party must prove each element
under §727 by a preponderance of the evidence. Allred v. Vilhauer (In re Vilhauer),
458 B.R. 511, 514 (B.A.P. 8th Cir. 2011) (citation omitted); Fed. R. Bank. P. 4005.

      Section 727(a)(4)(A) provides, in pertinent part, that “[t]he court shall grant the
debtor a discharge, unless. . . the debtor knowingly and fraudulently, in or in
connection with the case . . . made a false oath or account.” 11 U.S.C. §727(a)(4)(A).
The bankruptcy court stated, and we agree, that to establish a false oath under
§727(a)(4)(A), the Bank was required to prove that “(1) Debtor made a statement
under oath; (2) the statement was false; (3) Debtor knew the statement was false; (4)
Debtor made the statement with fraudulent intent; and (5) the statement related

                                           -6-
materially to the Debtor’s bankruptcy case.” In re Juehring, 332 B.R. 587, 591
(Bankr. N.D. Iowa 2005)); see also Fed. R. Bankr. P. 4005.

      The false statement must be “both material and made with intent.” Korte, 262
B.R. at 474. Proof of intent can be made by circumstantial evidence and a statement
made with reckless indifference to the truth is treated as if it is intentionally false. Id.

      Ample evidence supported the bankruptcy court’s determination that the
Debtor failed to disclose in his Schedules and Statements and failed to satisfactorily
explain the omissions of his livestock business and the gross income from it, over
$25,000 of income in 2007, the transfers of the two ATVs, the Bobcat and the tractor,
and the co-ownership with his wife of the Ford Explorer.

       The Debtor maintains that his answers were not false based on his
interpretation of the questions and that the bankruptcy court erred when it found that
he possessed the requisite knowledge and intent under §727(a)(4). He argues that he
did not understand what to disclose on his Schedules and Statements, but he tried his
best and he disclosed everything to the trustee. He provides several arguments and
explanations as to why he believes his reading of the questions is accurate and he
continues to maintain that the disclosures in his Schedules and Statements were
truthful and complete. The Debtor also appears to believe that he provided
“completely understandable” explanations regarding omissions from his Schedules
and Statements and that any omissions were merely mistakes. In addition, he submits
that any omissions were immaterial.

       The record supports the bankruptcy court’s decision that the Debtor made false
statements under oath. The Debtor argues that the bankruptcy court erred by finding
that any omissions by the Debtor were made knowingly and intentionally because
there was allegedly nothing in the record to support this determination. We disagree.
The bankruptcy court determined that the Debtor possessed the requisite knowledge
and intent by reviewing the evidence and the circumstances as a whole, and by

                                            -7-
judging the Debtor’s credibility. The bankruptcy court’s decision was plausible in
light of the record as a whole. See Anderson, 470 U.S. at 573-74 (where trial court’s
account is plausible, appellate court may not reverse even if it would have weighed
the evidence differently). It considered the omissions and the reasons given by the
Debtor for failing to disclose and determined that the Debtor’s explanations were “not
compelling in establishing innocent intent.”

      The bankruptcy court noted the Debtor’s experiences in the business world and
posited that the Debtor selectively understood certain concepts and “split hairs” in his
explanations, such as his attempt to label his livestock business as a “hobby farm” or
a farming business, rather than as a “business.” It noted that some of the reasons
given by the Debtor are simply not the law, such as his argument that his failure to
disclose gross income from his livestock business is excused by the fact that his
operation did not generate profit, and that others were incomprehensible. The Debtor
has not articulated how the facts fail to support the bankruptcy court’s decision.

       Moreover, the Debtor’s alleged failure to understand the information requested
on the bankruptcy Schedules and Statements does not provide grounds to withhold
information about his business. There is no doubt that a debtor who runs an
enterprise with sales as large as those of the Debtor’s hog operation must disclose in
bankruptcy everything he knows about that business. The Debtor effectively asks
us to adopt a subjective standard that would allow each individual debtor to make his
or her own individual determination of what is meant by the questions on the
Schedules and Statements and make disclosures accordingly. Such a subjective
standard for disclosure is simply not the law. The effectiveness of the bankruptcy
system depends on the Debtor’s complete candor, and it is not the job of the trustee
or creditor to search for information about the Debtor that should be readily disclosed
in his bankruptcy Schedules and Statements. See Mertz v. Rott, 955 F.2d 596, 598
(8th Cir. 1992) (“The petition, including schedules and statements, must be accurate



                                          -8-
and reliable, without the necessity of digging out and conducting independent
examinations to get the facts.”) (interior quotation marks omitted) (citations omitted).

       The Debtor’s omissions were material. “The subject matter of a false oath is
‘material,’ and thus sufficient to bar discharge if it bears a relationship to the
bankrupt’s business transactions or estate, or concerns the discovery of assets,
business dealings, or the existence and disposition of his property.” Chalik v.
Moorefield (In re Chalik), 748 F.2d 616, 618 (11th Cir. 1984) (per curiam) (quoted
in Mertz, 955 F.2d at 598 and Palatine Nat’l Bank of Palentine, Ill. v. Olson (In re
Olson), 916 F.2d 481, 484 (8th Cir. 1990)). The value of the undisclosed asset does
not determine whether the subject matter of the false oath is material and failure to
disclose even an asset with minimal value may be material. See Olson, 916 F.2d at
484. We agree with the bankruptcy court that even if discovery of the Debtor’s
property interests results in no recovery for his estate, the omissions here were
directly related to the Debtor’s business and his assets, defining them as material for
the purposes of §727(a)(4)(A).

                                  CONCLUSION
      For the foregoing reasons, the decision of the bankruptcy court is AFFIRMED.




                                          -9-
