HOWARD TALLMAN, Bankruptcy Judge
This matter comes before the Court on the Defendant's Motion to Alter or Amend Judgment [sic] or for New Trial [the "Motion"].
Defendant asks this Court to alter or amend its judgment or to grant the Defendant a new trial with respect to its Order on Amended Complaint dated July 25, 2005 [the "Order"]. FED. R. CIV. P. 59, incorporated into the bankruptcy rules by FED. R. BANKR. P. 9023, allows this Court to amend its judgment in this matter upon a finding that there is newly discovered evidence that the Defendant did not have the ability to present in the original trial of the matter or that the Court needs to correct a manifest error of law. Phelps v. Hamilton, 122 F.3d 1309, 1324 (10th Cir. 1997); see, also, Committee for First Amendment v. Campbell, 962 F.2d 1517, 1523 (10th Cir. 1992). The Defendant relies on the ground that the Court committed an error of law. The Court has reviewed the pleadings and heard arguments of counsel. After the Court's review of the prior proceedings, it finds no error in the Order and, accordingly, the Debtor's Motion will be denied.
The Defendant argues that the Court used an improper burden of proof in analyzing the U.S. Trustee's ["UST"] cause of action under § 727(a)(5). During its case in chief, the Plaintiff had identified very substantial income earned by the Defendant during 2001, 2002 and the prepetition portion of 2003. The Court found that the Defendant had failed to explain the dissipation of those earnings. According to the Defendant, the Court erred in shifting the burden to the Defendant upon the mere showing that the Defendant had substantial earnings during that period of time. It is the Defendant's view that a plaintiff's burden in such a case also requires it to direct the trial court to particular transactions for which it has not been given an explanation by the debtor.
As an initial matter, the Court recognizes that § 727(a)(5) cases based on a showing that the Defendant earned substantial income and has failed to explain the dissipation of that income are difficult and somewhat unusual cases. It is not necessary to define a threshold income amount that justifies application of § 727(a)(5) to cash income as opposed to other forms of assets. It suffices to observe that such application in this case is eminently reasonable in light of Debtor's earnings of $698,290.20 over a 2½ year period.
The allocation of the burden of proof used by the Court is the burden mandated by the plain language of § 727(a)(5) and the case law. As the Court pointed out in its original Order, § 727(a)(5) is akin to a strict liability statute. Baker v. Reed (In re Reed), 310 B.R. 363, 368 (Bankr. N.D. Ohio 2004) ("noticeably lacking from § 727(a)(5) is any element of wrongful intent . . . § 727(a)(5) simply imposes strict liability.)" As a consequence, the UST's burden is relatively light in this type cause of action. Once the UST identified the asset in question — in this case the Debtor's cash income — the burden did indeed shift to the Debtor to explain its dissipation. Caddle Co. v. Stewart (In re Stewart), 263 B.R. 608, 618 (B.A.P. 10th Cir. 2001).
To be satisfactory, the Debtor's explanation needed to satisfy two requirements. "First, it must be supported by at least some documentation. . . . Second, this documentation must be sufficient to `eliminate the need for the Court to speculate as to what happened to all the assets.'" Saluja v. Mantra (In re Mantra), 314 B.R. 723, 730 (Bankr. N.D. Ill. 2004) (citing Banner Oil Co. v. Bryson (In re Bryson), 187 B.R. 939, 956 (Bankr. N.D. Ill 1995)). "A debtor's explanation . . . must consist of more than `a vague, indefinite and uncorroborated hodgepodge of financial transactions. . . .'" Id. (citing Baum v. Earl Millikin, Inc. (In re Baum), 359 F.2d 811, 814 (7th Cir. 1966)).
Debtor suggests that her burden was met by showing that the money had been spent — that is, by bank statements showing that all of Debtor's income went into her bank accounts and that nothing remained as of the Petition Date. The initial flaw in that argument is that the record of evidence admitted at trial does not contain full sets of all of the Debtor's bank statements for the relevant period. In addition, "[i]t is not the role of the Court to sift through the Debtor's bank records in an attempt" to perform a detailed tracing analysis of funds in and out of those accounts in the absence of such an accounting entered into evidence by the Debtor. In re Mantra, 314 B.R. at 731. But, more to the point, proof that the money is gone is the essence of Plaintiff's case, not the Debtor's defense of the action. Even if the Court had been provided with all of those bank statements for the relevant period, simply demonstrating that the money has been dissipated does not provide the explanation required by § 527(a)(5).
The Court offers the following as examples of the kind of evidence that may have been helpful to the Debtor:
1. an accounting of money loaned or otherwise transferred to Debtor's business entities along with profit and loss statements of those businesses showing the loss of that money in the failed businesses;
2. an accounting of money lost to gambling activity;
3. if debtor's living expenses differed substantially from the budget submitted with her bankruptcy schedules, she could have submitted a sample budget plus testimony that explained the difference in expenses.
In its review of the evidence of record in this matter, the Court found that well over $400,000.00 of the Defendant's income for the period was unaccounted for. The Court would not expect that a defendant in an action such as this has the ability to trace every dime of the money that passes through an individual's hands over a period of time. But, by the same token, where there is at least $400,000.00 which is not accounted for in the 2½ year period before bankruptcy, the Court absolutely expects a defendant to come forward with the explanation which is, after all, required by § 727(a)(5). The Court's determination was not based upon the Debtor's failure to account for every dime, but upon the Debtor's failure to offer anything beyond the most vague and generalized explanation.
To some extent, Defendant confuses the materials provided to the UST with the evidence presented to the Court. The substance of Defendant's argument in that regard seems to be that she was subject to unfair surprise in defending the § 727(a)(5) cause of action because she had provided all of the information requested by the UST and the UST never came back to her to request further explanation. The Eleventh Circuit addressed a similar argument when it said " 11 U.S.C. § 727(a)(5) does not explicitly require a creditor to call upon a debtor to explain a loss of assets prior to filing an adversary proceeding. A denial of discharge under § 727(a)(5) requires only that the debtor fail to explain a loss of assets `before determination of denial of discharge under this paragraph.' To require a creditor to seek an explanation from the debtor prior to filing an adversary hearing would add an additional and redundant layer of inquiry to § 727(a)(5)." In re Hawley, 51 F.3d 246, 248-49 (11th Cir. 1995).
In reality, the Defendant could not have been surprised by the UST's pursuit of the § 727(a)(5) action. The UST's Amended Complaint to Deny Discharge [the "Amended Complaint"] was filed on September 20, 2004. The Amended Complaint clearly stated the § 727(a)(5) cause of action. If the Defendant required more detailed information regarding the nature of UST's § 727(a)(5) cause of action, the discovery process was available to her to seek that information. On December 1, 2004, the Court signed an order extending the discovery deadline to January 7, 2005. The Court provided a generous period of time for Defendant to conduct discovery so that she could be adequately prepared to defend herself as to the issues raised in the Amended Complaint. If the discovery period were not adequate; if the Defendant was not getting acceptable discovery responses from the UST; or she needed additional time for discovery, it was incumbent upon the Defendant to make the appropriate request. The Court's docket reveals no such request having been made.
In Defendant's argument to the Court, she suggested that the real basis of the published decisions on § 727(a)(5) claims was a failure to maintain adequate records. She argues that the Court was inconsistent in ruling in the Debtor's favor on the § 727(a)(3) count that alleged the Debtor had failed to maintain adequate records and then ruling against her on the § 727(a)(5) count alleging a failure to explain the dissipation of assets. The two causes of action may be frequently related, but it is significant in this case that they carry differing burdens of proof.
Part of the evidence that the Court received as to the § 727(a)(3) cause of action was the testimony of Glen Anstine, Defendant's chapter 7 trustee, that the Debtor was cooperative with him and provided all of the records and information which he required to perform his duties in the case. The Court heard no testimony from any other party involved in the Defendant's chapter 7 case to the effect that she had failed to maintain adequate records. Simply put, the UST failed to carry his burden of proof with respect to the § 727(a)(3) count.
By contrast, the UST, in the § 727(a)(5) cause of action, had a comparatively light burden of proof. In that cause of action, the greater burden, by far, rested on the Debtor's shoulders. The UST easily carried his burden of demonstrating the existence of the asset, in fact the income amount was stipulated to. It was the failure of the Debtor to carry her burden that resulted in the denial of her discharge.
In accordance with the above discussion, it is
ORDERED that the Defendant's Motion to Alter or Amend Judgment [sic] or for New Trial is DENIED.