In re Reed

Hugh Reed (Reed) ran a failing, insolvent retail store and, in the four months before filing for bankruptcy, engaged in extensive prebankruptcy planning: he sold guns, antiques, and stock at a steep discount, opened a hidden bank account into which he deposited store receipts without his creditors' knowledge, used that account to repay a $11,000 loan a corporation he owned had taken to buy antiques, and applied the proceeds of his last-minute sales to his mortgage — all while convincing trade creditors to temporarily hold off on collection. Reed also could not explain almost $20,000 in missing cash. The bankruptcy judge found Reed ineligible for discharge both for converting nonexempt to exempt property with fraudulent intent and separately for the unexplained missing cash, and the district court affirmed.