A Casus Omissus in Preventing Bankruptcy Fraud: Ordering a Search of a Debtor's Home

48 Pages Posted: 13 Mar 2014 Last revised: 15 Jul 2014

See all articles by Michael D. Sousa

Michael D. Sousa

University of Denver Sturm College of Law

Date Written: March 11, 2014

Abstract

Most individual debtors file for bankruptcy relief with honest intentions. Nonetheless, there is also an underside to the American bankruptcy law system that often goes unreported and ignored in the scholarly literature, namely, the commission of fraud by debtors who seek protection under the Bankruptcy Code. One of the ways in which fraud upon the bankruptcy system occurs is when debtors intentionally conceal assets from the bankruptcy process. Indeed, reported bankruptcy court decisions are rife with examples of debtors attempting to hide or shield assets from their creditors. Debtors who are discovered concealing assets are subject to certain civil remedies, such as the dismissal of their bankruptcy case or the denial of the discharge of their preexisting indebtedness. One of the ways to combat suspected fraud is to authorize a bankruptcy trustee to conduct a search of a debtor's residence to ensure compliance with the disclosure requirements of the Bankruptcy Code. The issue of a bankruptcy trustee 's search of a debtor's home, and more particularly the intersection between the Bankruptcy Code and the Fourth Amendment to the U.S. Constitution, has been addressed in two prior court decisions. On these occasions, the courts permitted a bankruptcy trustee to search a debtor's home, albeit after the trustee first obtained a "search order."

Incredulously, the two courts failed to address whether they in fact had the authority to order such a remedy. The issue is not free from doubt. Unlike other federal statutes that specifically authorize an administrative search, the Bankruptcy Code does not provide a statutory scheme authorizing a search of a debtor's home to uncover concealed assets. Consequently, there is presently a casus omissus, or an "unprovided-for case," in federal bankruptcy law. Thus, the purpose of this Article is to address this gap by answering whether a bankruptcy court has the requisite authority to issue what is in effect a search warrant for a debtor's residence. I answer this question in the affirmative, and contend that a bankruptcy court can utilize two sources of authority to issue a search order of a debtor's home, namely, the Federal All Writs Act and ยง 105 of the Bankruptcy Code. While admittedly counterarguments exist for the reliance upon these two sources of authority, which are addressed herein, they do provide a reasonable basis for a bankruptcy court to order a search of a debtor's home.

Suggested Citation

Sousa, Michael D., A Casus Omissus in Preventing Bankruptcy Fraud: Ordering a Search of a Debtor's Home (March 11, 2014). Ohio State Law Journal, Vol. 73, No. 93, 2012. Available at SSRN: https://ssrn.com/abstract=2407673 or http://dx.doi.org/10.2139/ssrn.2407673

Michael D. Sousa (Contact Author)

University of Denver Sturm College of Law ( email )

2255 E. Evans Avenue
Denver, CO 80208
United States

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