Here, the debtor was introduced to a bank by a known customer, who had an ongoing relationship with the bank, and the known customer verbally agreed to guarantee the loan.

The financial statement submitted by the new borrower did not alert the bank that further investigation of the borrower’s credit was warranted.

Hence, although the borrower’s financial statements were later found to be fraudulent, the court held the debt nondischargeable, even though no further investigation was conducted at time of the application. In re Watson (C.A. 10 [Okl.], WL 37668).

Author: Charles R. Harroun, Attorney at Law