Does the Fifth Amendment Right to Silence Apply in a Bankruptcy Proceeding?

The Constitution of the United States through the Fifth Amendment states that a person cannot be “compelled in any criminal case to be a witness against himself”. U.S. Const. amend. V. The question is whether the Fifth Amendment applies in a bankruptcy proceeding. Though the Constitution states that the Fifth Amendment applies to criminal cases, the privilege may be claimed in civil proceedings, including bankruptcy proceedings. In Re Jerry H. Mudd, 95 B.R. 426. Since a debtor’s bankruptcy testimony can be used in criminal proceedings, a debtor may invoke the Fifth Amendment in a bankruptcy proceeding unless he or she is granted immunity. In Re Susan Petr Hulon, 92 B.R. 670.

A debtor who voluntarily petitions a bankruptcy court for discharge of debts under Chapter 7 does not forfeit his or her rights guaranteed by the United States Constitution. In order to obtain a discharge, the debtor must comply with certain requirements. He or she must attend a meeting of creditors and comply with court orders, including orders compelling examination by a trustee. A debtor has the right to invoke his or her Fifth Amendment privilege against self incrimination if certain criteria are met. There are three requirements for a proper assertion of the Fifth Amendment privilege: 1) a compelled disclosure 2) found to be testimonial 3) which is incriminating. In Re Ronald A. Piperi, 137 B.R. 644. The debtor bears the burden of proof in demonstrating that he or she has a reasonable cause to apprehend a real danger of incrimination. Id. The debtor also bears the burden of providing sworn justifications of each and every assertion of Fifth Amendment privilege. Id. A debtor, however, cannot simply make a blanket Fifth assertion, he or she must assert the Fifth to each and every question asked at the hearing. In In Re Susan Petr Hulon, the Court held that the debtor improperly invoked her Fifth Amendment privilege against self-incrimination when she refused to take the oath and answer any questions on advice of counsel. Hulon at 671. The Court said that the proper way to invoke the Fifth Amendment was to take the oath and listen to each and every question asked by the trustee before specifically invoking her Fifth Amendment privilege by refusing to answer specific questions. Id.

The case law is clear. A debtor in a bankruptcy proceeding has the right to invoke the Fifth Amendment privilege against self-incrimination, but what happens if a debtor testifies in one hearing, then refuses to testify in another? The court has held that the Fifth Amendment may be waived by a witness’s prior statements, but a waiver will not be lightly inferred. Id. Courts indulge every reasonable presumption against finding a testimonial waiver. Id. There is a two part test to determine whether a debtor has waived his or her Fifth Amendment privilege. First, the debtor’s statements in a prior hearing have created a significant likelihood that the finder of fact will be left with and prone to rely on a distorted view of the truth. Second, the debtor has reason to know that his or her prior statements would be interpreted as a waiver. Mudd at 429. In Mudd, the debtor testified extensively at a 2004 hearing. At a second 2004 hearing regarding the trustee’s objection to discharge, the debtor raised his Fifth Amendment privilege. The Court held that applying the first prong of the test, the debtor had testified extensively as to many matters on which the trustee wished to question him further. As to the second prong of the test, the Court held that it was left with the statements of the debtor, and was prone to rely on those statements which the trustee claimed was a distorted view of the truth. The Court said “the law, however, does not permit a witness to open the door just wide enough to offer the Court an impaired view of the facts.” Id. In Mudd, the court found that the debtor had waived his Fifth Amendment privilege because he had given the court just enough information to tell his side of the story.

The moral of the story is that a debtor has the right to claim a Fifth Amendment privilege against self-incrimination, but if he or she has testified at a previous hearing, he does not have the right to leave the court with a distorted view of the truth. As a practical matter, the best advice to give a client who faces testifying to potential incriminating evidence is that he or she has the right to not answer these questions, but he does not have the right to refuse to answer any and all questions that a trustee may have at a hearing.