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IN RE BARRY

October 2, 1943

In re BARRY


The opinion of the court was delivered by: MOSCOWITZ

MOSCOWITZ, District Judge.

The bankrupt seeks to review the order of the referee denying his discharge in bankruptcy.

The referee sustained specifications of objections second and third which are as follows:

 "Second: That the bankrupt has committed a crime punishable by imprisonment under the Bankruptcy Act [11 U.S.C.A. § 1 et seq.] by knowingly and fraudulently making a false oath in this his bankruptcy proceeding, in that in his oath to Schedule B in his schedules in bankruptcy on file herein, the bankrupt swore that said schedule was a statement of all his property; whereas in truth and in fact it was not a statement of all his property, in that he had omitted therefrom an interest in a retirement fund, and such omission was material to such proceeding, as such fund might become an asset of this bankrupt's estate."

 "Third: That the bankrupt has failed at the adjourned first meeting of his creditors held herein on February 8, 1943, although requested to do so, satisfactorily to explain loss of assets or his deficiency of assets to meet his liabilities; such deficiency amounting to over $1500 and the assets not accounted for being the moneys borrowed from the creditors scheduled in his schedules in bankruptcy."

 He dismissed the specification of objection number 1.

 A considerable portion of the testimony relates to specification of objection number 1. The second specification of objection relates to the failure of the bankrupt to disclose his interest in a group insurance plan of the Federal Retirement System.

 The bankrupt and his wife, Gertrude M. Barry, both filed voluntary petitions and were adjudicated bankrupts on the same day. In re Hugh J. Barry, No. 43814, and In re Gertrude M. Barry, D.C., 52 F.Supp. 496. The referee denied the discharge of Gertrude M. Barry for failure to disclose her interest in the New York City Teachers' Retirement System which under the New York State Education Law, Section 1109- o, is exempt and therefore not an asset of the bankrupt's estate. The court has filed an opinion in that case reversing the referee and granting her discharge.

 The interest of the bankrupt Hugh J. Barry in the Federal Retirement System was not an asset of the bankrupt's estate. The interest of members in the Federal Retirement System is exempt from execution and an interest of a member cannot and does not become part of a member's estate in bankruptcy. Civil Service Retirement Act, 5 U.S.C.A. § 729, reads as follows:

 "§ 729. Annuities not subject to assignment, execution, levy, or other legal process.

 "None of the moneys mentioned in this or attachment, garnishment, or other legal process."

 Even though the bankrupt's estate was not entitled to any funds belonging to the bankrupt in the Federal Retirement System, nevertheless the bankrupt was required to list such interest in such fund in his schedules in bankruptcy and in his statement of affairs, and if he knowingly and fraudulently failed to do so that would bar his discharge. However, the failure to list the same due to mistake, oversight or ignorance would not bar a discharge. See In re Taub, 2 Cir., 98 F.2d 81; Willoughby v. Jamison, 8 Cir., 103 F.2d 821; Sharcoff v. Schieffelin & Co., 2 Cir., 70 F.2d 725; In re Lovich, 2 Cir., 117 F.2d 612, 113 A.L.R. 673.

 Nowhere in the memorandum filed by the referee does it appear that the failure to list the interest of the bankrupt in the Federal Retirement System was done knowingly or fraudulently. The referee merely states "the bankrupt is not to be the judge of whether or not the creditors have any claim against the fund." While that statement is correct, it does not complete the picture. The question always remains whether the failure so to do was an honest one, or was it done knowingly or fraudulently. The testimony of the bankrupt was perfectly consistent with reference to this matter. He testified on discharge proceedings, as follows:

 "Q. * * * at the time you executed your petition for bankruptcy and your schedules and statements did you think, at the time you executed them, of the existence of the City Retirement Fund? A. No, it didn't occur to me.

 "Q. You did not think about it whatsoever at that time, did you? A. No, I didn't.

 "Q. The non-placing of such a statement concerning such retirement fund in your petition was an oversight on your part?

 "The Referee: He said he didn't think of it; he wouldn't purposely omit it.

 "Q. If you had thought of it at the time would you have placed it in your schedules and your statement? A. Certainly."

 At the first meeting of creditors he testified "it didn't occur to me to schedule anything I didn't have in my possession."

 It is rather difficult to believe that the bankrupt, an employee in the Securities Exchange Commission, would knowingly and fraudulently fail to disclose his interest in the group insurance plan of the Federal Retirement System when anyone could obtain the information without the slightest difficulty. There is absolutely no evidence to sustain specification of objection number 2 and there is nothing in the memorandum of the referee in any wise indicating that the ...


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