UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Coastal Capital, LLC

v. Case No. 24-cv-59-SM-AJ Opinion No.

Steven Savage and Virginia Savage

O R D E R

After their company, Sky-Skan, Inc., experienced financial

difficulty and filed for bankruptcy protection, Steven and

Virginia Savage filed their own bankruptcy petition in the

United States Bankruptcy Court, District of New Hampshire. In

re Savage, 17-bk-11760 (Bankr. N.H.). One of the Savages’

creditors, Coastal Capital, LLC, filed an adversary proceeding,

In re Savage, 21-bk-01006-KB (Bankr. N.H.), seeking to deny them

discharges under

and to except the Savages’

obligations to Coastal from discharge under

.

Following a two-day trial, the bankruptcy court ruled in favor

of the Savages on five of Coastal’s claims but concluded under

§ 727(a)(5) that the Savages were not entitled to discharges.

The Savages appeal the judgment entered in the adversary

proceeding on grounds that the court made legal and factual

errors in arriving at that result. For the reasons discussed below, the bankruptcy court’s

decisions are affirmed.

Standard of Review

Federal district courts have jurisdiction to decide appeals

from final judgments, orders, and decrees of the bankruptcy

court.

(a); In re Shove,

(1st

Cir. 2023). The court reviews factual findings for clear error,

legal conclusions de novo, and discretionary decisions for abuse

of discretion. Id.; UMB Bank, N.A. v. MacMillin Co., LLC,

, 827 (D.N.H. 2023), appeal dismissed sub nom. In re

Prospect-Woodward Home, No. 23-2001,

(1st Cir.

May 3, 2024); In re Hoover,

(1st Cir. 2016).

“Under the clear error standard, [the court] defer[s] to the

bankruptcy court’s factual findings unless, on the whole of the

record, [the court] form[s] a strong, unyielding belief that a

mistake has been made.” In re Montreal, Maine & Atl. Ry., Ltd.,

(1st Cir. 2020) (internal quotation marks

omitted). “Abuse of discretion occurs when the trial court

ignores a material factor deserving significant weight, relies

upon an improper factor, or assesses all proper and no improper

factors, but makes a serious mistake in weighing them.” Torres

Lopez v. Consejo de Titulares del Condominio Carolina Ct. Apts.

(In re Torres Lopez),

(B.A.P. 1st Cir. 2009).

2 Background 1

Steven Savage was the president and sole shareholder of

Sky-Skan, Inc., a company that designed, installed, and

maintained equipment used in planetariums. Virgina Savage,

Steven’s wife, was the vice president and bookkeeper for the

company. The Savages operated Sky-Skan from a commercial

condominium in Nashua, New Hampshire, that Steven owned.

In July of 2011, Sky-Skan obtained a $900,000 line of

credit from Bank of America. The loan agreement gave Bank of

America a security interest in certain categories of Sky-Skan’s

property, and the Savages personally guaranteed the loan. To

secure his personal guaranty, Steven gave Bank of America a

mortgage on the Nashua condominium. Bank of America assigned

the Sky-Skan loan to Coastal Capital, LLC, in April of 2017.

By that time, Sky-Skan was having financial difficulty, and

the Savages were using their personal credit and debit cards to

fund Sky-Skan’s business operations. Sky-Skan and the Savages

defaulted on their obligations under the loan held by Coastal.

Coastal sought a restraining order in state court to prevent

1 The court will cite the record provided in document number 7-1 as "Appx.”

The background is summarized from the bankruptcy court’s trial and reconsideration decisions in the adversary proceeding, Doc. no. 7-1, Appx. 178-204 and Appx. 206-216, and the parties’ factual statements to the extent they are supported by the record.

3 Sky-Skan and the Savages from moving, concealing, encumbering,

wasting, or altering the collateral for the loan and their

guaranties. The state court issued the requested orders in

August of 2017 and allowed Coastal to secure the collateral,

take possession of all bank accounts, and to conduct a secured

party sale of the collateral. The court later found that

actions taken by Sky-Skan and the Savages were in contempt of

its orders and ordered them to pay Coastal’s fees and costs.

Sky-Skan filed a voluntary Chapter 11 petition in the

bankruptcy court on November 1, 2017. Sky-Skan’s statement of

financial affairs disclosed that Sky-Skan transferred

$704,075.00 to the Savages to reimburse them for the funds they

provided to Sky-Skan during the year before Sky-Skan filed for

bankruptcy. On December 20, 2017, the Savages filed their own

chapter 11 bankruptcy petition. The Savages’ statement of

financial affairs did not show the $704,075.00 transferred to

them by Sky-Skan. The Savages owed Coastal $1,000,000.00 at the

time of filing. They owed additional amounts to the Internal

Revenue Service.

The Savages’ case was converted to a chapter 7 proceeding

on November 12, 2020. Coastal filed an adversary proceeding

against the Savages on February 8, 2021, objecting to their

bankruptcy discharges and the dischargeability of the debt owed

to Coastal. Coastal brought six claims in the adversary

4 proceeding, objecting to discharge under

(a)(2)(A), 727(a)(4)(A), 727(a)(5), and 727(a)(7), and

objecting to dischargeability under

(a)(4) and

§ 523(a)(6). The court narrowed the claims on summary judgment

leaving Counts I-III and parts of Counts IV-VI for trial.

The bankruptcy court held a two-day trial. Steven and

Virginia Savage were the only witnesses. The court found in

favor of the Savages on Counts I, II, IV, V, and VI. On Count

III, however, in which Coastal challenged the Savages’ discharge

under § 727(a)(5), the court found in favor of Coastal. The

court denied the Savages discharges under § 727(a)(5), and

judgment entered on November 28, 2023.

The Savages moved for reconsideration under Federal Rule of

Civil Procedure 59(e), made applicable to a bankruptcy

proceeding under Federal Rule of Bankruptcy Procedure 9023, and

for relief under Rule 60, made applicable under Bankruptcy Rule

9024. Following a hearing on the motion, the court concluded

that the Savages provided no grounds for reconsideration under

Rule 59(e). With respect to relief under Rule 60, the court

noted that the Savages relied on Rule 60(b)(3), pertaining to a

party’s misconduct, and Rule 60(b)(6), the catchall provision.

The court found that the Savages’ arguments on misconduct were

inconsistent and that they had not shown any misconduct by

Coastal. The court also rejected the Savages’ new theory under

5 Rule 60(b)(6) that the court should have considered the amounts

listed on their Schedule J filed in the bankruptcy case to find

that more of the missing money ($44,968.79) was explained. The

court concluded that the Savages provided no grounds for relief

under Rule 60(b)(6) because it was the Savages’ burden to

explain where the missing funds had gone, because the Savages

did not raise Schedule J until the post judgment motion for

reconsideration, and because Schedule J did not provide the

required explanation. The Savages then sought review in this

court of the bankruptcy court’s decision to deny them discharges

under § 727(a)(5).

Discussion

“The court shall grant the debtor a discharge, unless – 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.” § 727(a)(5); see also In re Simmons,

(1st Cir. 2016) (“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.”). Courts address claims

under § 727(a)(5) in a burden-shifting framework. Id., at 860.

The party seeking to deny the debtor discharge must show “that

6 the debtor has not accounted for previously owned assets or

previously earned income.” Id. If that showing is made, the

debtor must explain the deficiency, and that 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. (internal quotation marks

omitted).

The Savages raise five issues in support of their appeal of

the bankruptcy court’s decisions. First, they challenge the

bankruptcy court’s calculation of the amount of the unaccounted-

for missing money. Second, they contend that the amount of

unaccounted-for money was not a substantial asset within the

meaning of § 727(a)(5). Third, the Savages contend that the

bankruptcy court erred in finding that they did not account for

part of the missing money, and fourth, alternatively, that the

bankruptcy court erred in not finding that Coastal prevented

them from making the necessary showing by withholding and

destroying the supporting documentation. Fifth, the Savages

contend that the bankruptcy court erred in denying their

discharges entirely rather than limiting the denial to the

amount of unaccounted-for money. Coastal opposes all grounds

that the Savages raise.

7 A. Calculation of the Missing Money

The bankruptcy court calculated the missing money as

follows. Sky-Skan transferred $704,075.27 of the Coastal loan

to the Savages, but the Savages no longer had that money at the

time of the bankruptcy. The bankruptcy court found that the

Savages provided explanations for $684,599.42 of the

$704,075.27, but they could not explain what happened to the

remaining $19,475.85.

In addition, the court further scrutinized $89,500.00 of

the money received from Sky-Skan, which the Savages explained

was rent for the commercial condominium where the Savages

operated Sky-Skan, and was used to pay the mortgage on the

condominium and personal expenses. The court found that the

Savages did not use all of Sky-Skan’s rental payments to pay the

condominium mortgage, leaving $15,151.29 unaccounted for, and

that $22,026,36 was not accounted for as personal living

expenses. The bankruptcy court found that the missing money

totaled $56,653.50.

On appeal, the Savages challenge the bankruptcy court’s

calculation on grounds that the court improperly allocated the

burden of proof (to explain missing money) to them rather than

8 Coastal and failed to consider the Schedule J amounts pertaining

to living expenses. 2

1. Burdens

The Savages argue that it was “Coastal’s burden to prove

that a substantial asset was not accounted for, and so it was

Coastal’s burden to establish the total amount of the

unaccounted-for funds.” Doc. no. 7, at 30. They contend that

the bankruptcy court made a clearly erroneous factual error in

finding that Coastal met its burden, and that error resulted in

erroneously shifting the burden to the Savages to account for

the missing money. The Savages misunderstand the burden-

shifting framework under § 727(a)(5).

The party challenging discharge under § 727(a)(5) “has the

initial burden of producing some evidence that the debtor no

longer has assets which he previously owned.” In re Fustolo,

(Bankr. Mass. 2019) (internal quotation marks

omitted). The missing asset or assets must be “substantial” to

satisfy the plaintiff’s initial burden. In re Brien,

(B.A.B. 1st Cir. 1999); see also In re McDonald,

(6th Cir. 2022) (holding that the missing assets

2 The Savages do not challenge the bankruptcy court’s arithmetic as to the amount of unaccounted-for missing money.

9 for the plaintiff’s initial burden must be “substantial and

identifiable”). If the creditor meets the burden of showing

that the debtor no longer has assets that he previously owned,

the debtor must “provide a satisfactory explanation for the loss

or deficiency of the asset.” Fustolo,

. “Section

727(a)(5) is broadly drawn and gives the bankruptcy court broad

power to decline to grant a discharge in bankruptcy when the

debtor does not adequately explain a shortage, loss, or

disappearance of assets.” In re Aoki,

(B.A.P.

1st Cir. 2005).

The Savages contend that Coastal did not meet its initial

burden of proving that substantial assets were missing and, for

that reason, the bankruptcy court erred in putting the burden on

them to account for missing assets. The bankruptcy court found

(and it appears to be undisputed) that Sky-Skan transferred

$704,075.27 to the Savages, which was listed on Sky-Skan’s

statement of financial affairs filed in its bankruptcy

proceeding. Steven Savage signed that document under pains and

penalties of perjury. It also appears to be undisputed that the

Savages did not have that money when they filed their bankruptcy

petition; that money was not included in the Savages’ statement

of financial affairs filed in their personal bankruptcy case.

Based on those circumstances, Coastal proved that before they

filed for bankruptcy protection, the Savages had identifiable

10 and substantial assets, $704,075.27, and that they no longer had

those assets at the time of filing. That proof shifted the

burden to the Savages to provide an explanation for what

happened to the substantial sum transferred from Sky-Skan. The

Savages have not shown that the bankruptcy court erred in

shifting the burden to them to account for the missing money.

2. Schedule J

The Savages argue that the amount the bankruptcy court

found was missing and unaccounted for is incorrect because it

does not include the amounts they listed on Schedule J filed in

the bankruptcy case to show their household expenses. 3 They

contend that Schedule J shows $77,815.29 in household expenses

that would account for all but $11,684.71 of the unaccounted-for

money. They assert that because it was Coastal’s burden to show

that the Savages did not account for the missing money and

Coastal did not challenge Schedule J, they can rely on that

document to show that the missing amount is $11,684.71. As is

discussed above, it was not Coastal’s burden to prove what the

Savages did with the missing money. In addition, as the

3 Schedule J lists the debtors’ expenses in response to certain questions and categories as of the petition date. In re Rudler,

(1st Cir. 2009). The Savages’ Schedule J reflects expenses as of December 20, 2017, when the petition was filed. Appx. 85-88.

11 bankruptcy court noted, even under the Savages’ theory, they

still did not account for $11,815.29, which would support the

bankruptcy court’s decision to deny them discharges.

In addition, the Savages first raised the argument that

Schedule J would provide an explanation for some of the missing

money in their post judgment motion for reconsideration, citing

Federal Rule of Civil Procedure 60(b)(6). Rule 60(b)(6)

provides relief from judgment when extraordinary circumstances

justify reopening the case. Kemp v. United States,

(2022). Rule 60(b), however, “is available only when

Rules 60(b)(1) through (b)(5) are inapplicable.” Id.; accord

Quinones v. Frequency Therapeutics, Inc.,

, 566

(D. Mass. 2024). A decision on a Rule 60(b)(6) motion is

reviewed for an abuse of discretion. Teamsters, Chauffeurs,

Warehousemen & Helpers Union, Loc. No. 59 v. Superline Transp.

Co.,

(1st Cir. 1992).

The Savages point to no extraordinary circumstances that

might justify reopening the adversary proceeding to consider

Schedule J. They state only that they did not introduce

Schedule J during trial because “they had limited trial time to

get through thousands of pages of accounting records to show how

they used the majority of the funds.” Doc. no. 7, at 30. They

do not explain why trial time was limited or cite a court order

that limited the time for presenting their case. Further,

12 Schedule J was readily available to them, having been filed in

their bankruptcy case.

It appears that the Savages, who are represented by

competent counsel, made the strategic choice not to introduce

Schedule J to support their explanation for the missing money.

That choice, which resulted in failing to introduce evidence

that the Savages now believe would be material, might fit under

Rule 60(b)(1) as possibly a mistake or excusable neglect. See

Kemp,

. The Savages, however, relied on Rule

60(b)(6) and cannot now seek relief under Rule 60(b)(1) on

appeal.

.

The bankruptcy court did not abuse its discretion in

rejecting the Savages’ post-trial theory that Schedule J would

provide the needed explanation for missing money. The Savages

have shown no error in the bankruptcy court’s calculation of the

missing and unaccounted-for money.

B. Substantial Asset

The Savages assert that their unaccounted-for missing

money, $56,653.50 as calculated by the bankruptcy court, or

$11,815.29 as calculated by the Savages, was not sufficiently

substantial to warrant denying them discharges under 727(a)(5).

In their reply, they argue that § 727(a)(5) is limited to

13 unaccounted-for assets that “cause the Debtors to be unable to

satisfy their liabilities.” Doc. no. 11, at 5.

Section 727(a)(5) requires a debtor to account for “any

loss or deficiency of assets to meet the debtor’s liabilities.”

(Emphasis added.) The statutory language does not require that

unaccounted-for amounts be so substantial that, if accounted

for, the debtor would be able to fully satisfy his or her

liabilities. 4 Therefore, the plain meaning of § 727(a)(5) does

not support the Savages’ strained interpretation.

The Savages quote In re Tully,

(1st Cir.

1987), to establish that the unaccounted-for missing money must

be “real and substantial.” In that case, however, the court was

addressing a different section, § 727(a)(4), under which “the

debtor can be refused his discharge only if he (i) knowingly and

fraudulently made a false oath, (ii) relating to a material

fact.” Id. In considering whether that burden was met, the

court stated: “‘The reasons for denying a discharge to a

bankrupt must be real and substantial, not merely technical and

conjectural.’” (quoting Dilworth v. Boothe,

, 624

4 The Savages argue that because they owed so much to Coastal, the unaccounted-for money did not make any difference in their ability to satisfy their liabilities. Of course, some repayment is better than no repayment, particularly from the point of view of the creditor. The Savages cite no authority to support their interpretation of § 727(a)(5), and the court finds that theory unpersuasive.

14 (5th Cir. 1934)). Section 727(a)(5) does not require proof of

knowingly and fraudulently making a false oath, or materiality,

but instead focuses on the sufficiency of the explanation for

missing assets. 5 The Savages have not shown that unaccounted-for

missing money must be “real and substantial” to support denial

of discharge under § 727(a)(5).

The Savages also argue that a requirement exists that “the

lost asset be of ‘substantial value relative to the debtors’

liabilities’” before they will be denied discharges. Doc. 7, at

31 (quoting In re McDonald,

). They assert that

the missing assets are not substantial relative to their total

debt of more than $2 million. For that reason, they contend,

the bankruptcy court erred in denying discharges based on the

amount of the missing and unaccounted-for money.

In that section of McDonald quoted by the Savages, the

issue was not whether a missing asset must be substantial to

support denial of discharge under § 727(a)(5). Instead, the

court addressed a different question: the look-back period for

identifying debtors’ missing assets. Id. at 822. The trustee

pointed to a loan and a line of credit as lost assets, but the

5 The bankruptcy court considered Coastal’s request to deny discharge under § 727(a)(4) in this case and rejected it, concluding that Coastal had not shown that the Savages knowingly and fraudulently withheld information from their creditors or the court. Appx. 191.

15 debtor argued that he acquired those assets too far before the

time he filed the petition, i.e. too far back, to be counted for

purposes of § 727(a)(5). Id. The court noted that § 727(a)(5)

does not have a specific look-back period, as other sections of

§ 727(a) have, but also noted that for purposes of the sections

with a look-back period, “the existence of lost assets of

substantial value relative to debtors’ liabilities often

warrants the extension of such two-year period.” Id. at 823.

Therefore, the court in McDonald did not hold, as the Savages

represent, that only unaccounted-for missing money that is

substantial in relation to the entire debt supports discharge

denial under § 727(a)(5). The misquote from McDonald does not

establish that rule or show any error by the bankruptcy court.

As the Savages concede, whether to deny a discharge under

§ 727(a)(5) is a matter left to the bankruptcy court’s

discretion, which turns on the particular circumstances

presented. The Savages have not shown any circumstances

suggesting that the thousands of dollars of missing and

unaccounted-for money was insubstantial or that the bankruptcy

court’s exercise of discretion was in any way objectionable.

See, e.g., Fustolo,

(denying discharge under

§ 727(a) when debtor could not explain $29,981.00 of $449,518.47

16 and finding that “this amount of unaccounted for cash is not

insubstantial under any definition”). 6

Therefore, the Savages have not shown error or an abuse of

discretion by the bankruptcy court based on a theory that the

unaccounted-for missing money was not substantial.

C. The Savages’ Explanations

The Savages contend that the bankruptcy court erred in

finding that they did not satisfactorily account for $56,653.50

of the missing money. The court found that the Savages were

able to provide documentary evidence to show the disposition of

some of the missing money and credited the Savages’ testimony to

explain certain additional amounts. The court did not find

adequate explanation for the remaining amounts.

Under § 727(a)(5), “once the plaintiff has established the

loss of an asset, it is up to the debtor to provide a

satisfactory explanation for the loss or deficiency of the

asset.” In re Aoki,

(B.A.P. 1st Cir. 2005).

To be satisfactory, “the debtor’s explanation “must be supported

by at least some corroboration” and “must be sufficient to

6 The Savages argue that the court should disregard the holding in Fustolo as an outlier. That decision, however, remains good law in the First Circuit, and while it is not precedential, it is persuasive.

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

all of the assets.” Id.; accord In re McNamara,

,

189 (Bankr. D. Mass. 2020). For that reason, a debtor’s

“[v]ague or indefinite references, evidence or explanations, or

an uncorroborated hodgepodge of financial transactions” do not

satisfy the debtor’s burden to provide a satisfactory

explanation.”

(internal quotation marks omitted). Aoki,

; accord McNamara, 620 B.R. at 189 (Bankr. D.

Mass. 2020); see also Centennial Bank v. Kane, No. 23-CV-02944-

WHO,

, at *4 (N.D. Cal. Mar. 29, 2024); Osuji v.

Azie, No. 20-CV-1365 (PKC),

, at *6 (E.D.N.Y. Feb.

16, 2021); In re Elian, No. 10-49482 DHS,

, at *5

(D.N.J. Sept. 2, 2015), aff'd,

(3d Cir. 2016).

“What constitutes a ‘satisfactory’ explanation for § 727(a)(5)

purposes is left to the discretion of the court.” In re Park,

(3d Cir. 2017) (additional internal

quotation marks omitted).

The Savages argue that “overwhelming evidence” at trial

showed that they satisfactorily accounted for the missing funds.

Doc. no. 7, at 34. On appeal, however, they point to no record

evidence tending to explain what happened to the unaccounted-for

money. Instead, they merely assert that they spent time looking

for financial records, that “Steven is not a sophisticated

accountant,” and that Virginia handled the bookkeeping but she

18 was not an accountant and had no formal training. Id. at 37.

But they do not identify record evidence that accounts for the

missing money. As such, the Savages have shown no abuse of

discretion by the bankruptcy court in finding that they did not

provide a satisfactory explanation for the unaccounted-for

money.

D. Misconduct by Coastal

Alternatively, the Savages fault Coastal for their own

failure to provide evidence or a satisfactory explanation of

what happened to the unaccounted-for money. They accuse Coastal

of refusing them access to documents and then destroying

documents that would have demonstrated what happened to the

money. They ask for a spoliation of evidence inference as to

the evidentiary value of the unidentified destroyed documents.

The Savages first raised the issue of their access to

documents in Coastal’s possession in the context of their motion

for reconsideration under Rule 60(b)(3). “[T]he burden is on

the Rule 60 movant to demonstrate the existence of exceptional

circumstances justifying relief from judgment.” U-Nest

Holdings, Inc. v. Ascensus Coll. Sav. Recordkeeping Servs., LLC,

(1st Cir. 2023). Under Rule 60(b)(3), the court

may relieve a party from a final judgment for “fraud . . .,

misrepresentation or misconduct by an opposing party.” The

19 moving party “must demonstrate misconduct — such as fraud or

misrepresentation — by clear and convincing evidence and show

that the misconduct foreclosed full and fair preparation or

presentation of her case.” Giroux v. Fed. Nat. Mortg. Ass'n,

(1st Cir. 2016) (internal quotation marks

omitted). Review of a decision under Rule 60(b)(3) is for abuse

of discretion. U-Nest Holdings

.

The bankruptcy court concluded that the records referred to

by the Savages, or some of them, were moved to the business

condominium where Sky-Skan previously operated, and that the

trustee in Sky-Skan’s Chapter 7 case told Coastal that any

records or documents that Coastal did not remove would be

destroyed. Based on the record in the Sky-Skan case, the

bankruptcy court determined that the Sky-Skan trustee sought

authority to destroy records on June 10, 2021, which was granted

in August, with permission given to Coastal to take records

before August 18, with certain requirements. The Savages and

their counsel were served with the motion and the order, and

they were aware of those proceedings. The Savages did not

object or seek to appeal the order.

Discovery in the adversary proceeding did not close until

January 31, 2022, but the Savages propounded no discovery

requests. Nor did they otherwise seek access to any of the Sky-

Skan records that Coastal possessed or had access to after

20 August 18. For that reason, Coastal had no obligation to

supplement discovery requests based on the Sky-Skan records.

The bankruptcy court found that the Savages had not shown any

misconduct by Coastal with respect to the Sky-Skan records.

On appeal, the Savages argue that Coastal improperly denied

them access to the Sky-Skan records. In support, they assert,

without evidence, that they tried to get the records at Sky-

Skan’s office, but their key did not work. When they contacted

Coastal’s counsel, the response was that discovery was closed.

The Savages provide no detail about when they attempted to

enter the office, which apparently was under the control of the

Sky-Skan trustee. They do not explain why they did not seek

discovery in the adversary proceeding or why they did not

contact the Sky-Skan trustee about the records. They have not

provided any evidence of misconduct by Coastal, much less clear

and convincing evidence of misconduct.

The Savages also made no proffer about what they expected

the Sky-Skan records to show. For that reason, they have not

shown that the Sky-Skan records would have assisted in their

explanation of the unaccounted-for money. Further, as the

bankruptcy court noted, the Savages’ theory that the absence of

the Sky-Skan records prevented them from providing a

satisfactory explanation is inconsistent with their theory that

21 their Schedule J explained what happened to the unaccounted-for

money.

The Savages have not shown that the bankruptcy court abused

its discretion in denying them relief under Rule 60(b)(3).

E. Partial Discharge

In the Savages’ final challenge to the bankruptcy court’s

decision, they argue that a discharge should have been denied

only to the extent of the unaccounted-for money. They rely on

cases that address settlement of § 727(a)(5) claims to contend

that because the United States Trustee and the Chapter 7 Trustee

did not object to discharge, denial of discharge should be

limited.

The Savages did not raise their novel theory for a partial

discharge in the bankruptcy court, and for that reason it is not

properly before this court on appeal. In re Cruz Rivera,

(B.A.P. 1st Cir. 2019); In re U Lock, Inc., No.

BR 22-20823,

, at *4 (W.D. Pa. Oct. 11, 2024).

In the absence of persuasive authority, or a reason to overlook

the “raise or waive” rule, the court declines to overturn the

bankruptcy court decision based on a theory that was not

previously raised.

Even if the partial discharge theory had been properly

presented, it would not succeed. The language of § 727(a)(5)

22 provides grounds to deny discharge, without any suggestion that

there might be a partial denial. The Savages cite no case or

other authority to support an interpretation of § 727(a)(5)

requiring a limited denial of discharge given the circumstances

that exist in this case. Therefore, the Savages provide no

grounds to reverse the bankruptcy court’s decision to deny them

discharges, based on their partial discharge theory.

F. Equitable Principles

The Savages invoke equitable considerations that underly

bankruptcy protection to support each of their theories of

relief from the bankruptcy court’s decision, and argue that they

should be allowed a full discharge. They cite In re Hannon,

(1st Cir. 2016), where the court stated that “the

statutory right to a discharge should ordinarily be construed

liberally in favor of the debtor” in the context of an objection

to discharge under § 727(a)(4). In contrast, “[s]ection

727(a)(5) is broadly drawn and gives the bankruptcy court broad

power to decline to grant a discharge in bankruptcy when the

debtor does not adequately explain a shortage, loss, or

disappearance of assets.” In re Aoki,

.

The court is satisfied that the bankruptcy court fully

considered equitable principles and the material circumstances

23 presented by the Savages in concluding that they were not

entitled to a discharge under § 727(a)(5).

Conclusion

For the foregoing reasons, the bankruptcy court’s decision

denying the Savages a discharge, pursuant to § 727(a)(5), is

affirmed.

SO ORDERED.

______________________________ Steven J. McAuliffe United States District Judge

February 13, 2025

cc: Counsel of Record

24