Bankr. L. Rep. P 70,524 in Re Cloyd W. Devers and Barbara Devers, Debtors. Cloyd W. Devers and Barbara Devers v. Bank of Sheridan, Montana

Cloyd and Barbara Devers (“Debtors”) were denied a general discharge in bankruptcy for fraudulent conduct which violated 11 U.S.C. § 727 . The district court affirmed, and this appeal followed. We affirm.

FACTS

In August 1981, Debtors filed a voluntary joint petition under Chapter 11 of the Bankruptcy Code. They became debtors-in-possession of their hog breeding facility and continued the operation, pursuant to 11 U.S.C. §§ 1107 , 1108. In April 1981, the Debtors had borrowed $94,802 from the Bank of Sheridan, Montana (“Creditor”), and had pledged their livestock, ranch equipment and supplies as security for the loan.

Shortly after the Chapter 11 filing, the Creditor learned that the Debtors were selling the secured livestock in violation of the security agreement, and the Creditor sought relief from the automatic stay in order to repossess its security.

At a hearing on the Creditor’s motion, Cloyd Devers admitted he was selling the livestock and putting the money into his regular bank account, and that he had not informed the Creditor of these sales. The Debtors were specifically told by the court to notify the Creditor within five days of selling any secured property and to…