Sec. 91. Importance Of Discharge

The bankrupt's discharge is granted him if applied for by him as required by the Act, and has the effect of releasing him from his dischargeable debts. His discharge may be denied him for the causes specified in the Act.

It is the bankrupt's discharge in bankruptcy that releases him from his indebtedness. Merely filing a petition in bankruptcy does not discharge him. He must apply for and get his discharge, and if he fails to get it, or is denied it, his creditors may hold him notwithstanding the bankruptcy proceedings.

Sec. 92. Within What Time Discharge Must Be Applied For

A discharge must be applied for within twelve months from the time the adjudication is made. On good cause shown the time may be extended six months.

The bankrupt should be careful to apply for his discharge within the time specified in the law. Otherwise the proceedings will have accomplished him nothing.

Sec. 93. The Petition For Discharge

The application for a discharge is made by way of petition. Notice must be given to creditors.

The bankrupt applies for his discharge upon Official Form No. 57. Section 14 of the Act, governs the application for discharge. Section 58 provides that there shall be 30 days notice to creditors.

Sec. 94. Filing Objections To Discharge

Any creditor may file objections to discharge.

A creditor who desires to object to the bankrupt's discharge must file objections. He must enter his appearance in writing by the discharge day and specify the grounds of discharge within ten days thereafter. If not specified within that time, the bankrupt is entitled to his discharge. If the objections are specified, they are heard and passed upon, and the discharge allowed or denied according to the outcome.

A trustee, or any party in interest, may object to a discharge.

Sec. 95. Grounds For Refusing Discharge

The bankruptcy law enumerates the causes that are ground for objections to discharge.

The grounds upon which a discharge may be refused are as follows:

(1) Commission of any offenses created by the bankruptcy law.

The offenses defined in the bankruptcy act have been set out in Section 89 of this book. The law (SEC. 14b) sets forth that a bankrupt shall be entitled to a discharge unless he has "committeed an offense punishable by imprisonment as herein provided" (or unless he has been guilty of the other conduct herein below considered).

(2) Concealment or destruction of books or failure to keep books of record with intent to conceal financial condition.

A bankrupt is not entitled to his discharge if he has "with intent to conceal his financial condition, destroyed, concealed, or failed to keep books of account or records from which such condition might be ascertained."

Mere failure to keep books is not enough to prevent discharge. The law specifically requires that there shall be an intention to conceal his financial condition. "The bankruptcy act of 1867, as does the English law, made the mere failure to keep books a ground for refusing a discharge, but the Bankruptcy Act of 1898 explicitly states that the omission must have been accompanied with the specific intent to conceal the true financial condition and hence the burden of proving this intent is on the objecting creditors."189

Many merchants are careless about keeping books, never expecting to fail in business, although the slipshod methods may be the reason for their financial downfall.190

But it has been held that if a man of experience refuses to keep books, the natural presumption is that he intended to conceal his financial condition.191 But this presumption is rebuttable.'192 "The bookkeeping of the bankrupt (a country butcher) was of that primitive character which sometimes is found in country stores and which is employed for little else than to supplement the store keeper's memory as to which of his customers are his debtors and what are the amounts of their debts.'

189. In re Brown, 199 Fed. 356.

190. In re Blalock, 118 Fed. 659.

191. In re Alvord, 135 Fed. 236; In re Javanitz, 219 Fed. 876; In re Schuner, 228 Fed. 794.

192. Thompson v. Lamb, (C. C. A. 3rd Cir.) 263 Fed. 61.

In the case of In re Shriner193 the court said: "The objecting creditor carries the burden of establishing the unlawful intent. It is well settled both upon reason and authority, that when intent becomes an essential element in a judicial investigation the quest for its existence, is to be made by resorting to the same methods of proof as for any other fact. As it is a fact peculiarly, and so far as direct evidence goes exclusively within the knowledge and keeping of the party charged with the wrongful conduct, of necessity the court may resort to interferences for conceded or established facts, the probative value of which will depend largely upon the reason of the thing. It is customary for honest merchants, having a regard for the success of their business and their commercial credit, to make and keep some record - entries in books, or at least memoranda - showing the course of business. The form, manner, method of doing this depends largely upon the character, volume, etc., of the business; the accuracy of such records will depend largely upon the experience and intelligence of the person making them. So their absence or character may be accounted for by reference to the same conditions. The only facts disclosed by the record are that the bankrupt was, for three years, in one of the largest of our commercial centers, conducting the business of buying and selling merchandise: it does not appear that he was ignorant or illiterate; his business involved carrying a stock of at least $4000 and contracting an indebtedness of $7,500; he made deposits in bank and drew checks. * * There is a rule of reason - sound in morals as in law - that a man is presumed to intend the logical and inevitable results of his conduct. * * * Here the only explanation of the so-called 'failure' is the loss of 'several hundred dollars' in gambling. This is entirely insufficient to rebut the natural and logical inference which should be drawn from the bankrupt's failure to keep books."

193. 228 Fed. 794.

(3) Obtaining money or property upon credit on false written statement.

A bankrupt will be denied his discharge if he has "obtained property on credit from any person upon a materially false statement in writing made to such person for the purpose of obtaining such property on credit."

To constitute this objection there must have been both a false statement in writing and the procuring of goods on the strength thereof, and the statement must be intentionally and materially false.194

Statements made to mercantile agencies are statements within the meaning of this provision, if relied upon by creditors.195

Any creditor may avail himself of this objection although personally not misled thereby.196

(4) Making fraudulent conveyance within four months prior to bankruptcy.

A bankrupt will be denied his discharge if he has "at any time subsequent to the first day of the four months immediately preceding the filing of the petition transferred, removed, destroyed, or concealed, or permitted to be removed, destroyed or concealed any of his property, with intent to hinder or delay or defraud his creditors."

194. 268 Fed. 871; 262 Fed. 876.

195. In re Carton & Co. 148 Fed. 63.

196. Id., In re Harr, 143 Fed. 421.

This is another ground for refusing discharge. We have considered fraudulent conveyances elsewhere. A fraudulent conveyance is an act of bankruptcy; it is a transfer avoidable by the trustee; it is a ground for refusing discharge.

(5) In voluntary cases, a prior discharge in bankruptcy with six years.

This ground of discharge is to prevent debtors from continually coming before the court with petitions in bankruptcy. It is not a ground for refusing discharge in involuntary cases.

The time is counted as running from the date of the order allowing the discharge on the second application.197

(6) Refusing to obey any lawful order, or answer any material question approved by the court.

This ground of refusal has been elsewhere considered.198