Pre-Approved Credit Card debt held nondischargeable.  Here, the debtor received a pre-approved credit application and, within one and one-half months prior to filing a bankruptcy, borrowed more than $1,600 from ITT Financial Services (hereinafter “ITT”).

Debtor failed to make any payments to ITT on his loan and sought to discharge the debt in bankruptcy.

This unusual case presented the issue as to whether the debtor intended to deceive the lender as to whether or not debtor could afford to make the payments as promised by the note.

Debtor signed a promissory note with ITT which stated, in part, that he would pay ITT Thirty-seven (37) monthly payments of Sixty-six Dollars ($66.00) each. At the time debtor signed the note, debtor’s wife was not employed and had cancer. Debtor was also incurring medical expenses on behalf of his wife at the time the loan documentation was signed.

The court noted that in order for ITT to succeed in this action and render this debt nondischargeable, it must prove: (1) that the debtor made a false representation(s); (2) that at the time made, the debtor knew it to be false or acted with gross recklessness as to its truth; (3) that the representations were made with the intention and purpose of deceiving ITT; (4) that the creditor reasonably relied on the representation(s); and (5) that ITT sustained damage as a direct result of the debtor’s representation(s).

The court found that since debtor’s wife was not employed, even though debtor alleged he believed his wife would be able to return to work soon, this expectation was not realistic. The court also advised that it may consider all the facts when determining whether a debtor intended to deceive a creditor. In that light, the court noted that the “debtor’s state of mind is nearly impossible to obtain…”; and the creditor may, therefore, present evidence from which “intent may be inferred.”

The court found that debtor intended to deceive ITT when he signed the note indicating payments would be made toward the loan and that ITT reasonably relied upon such represen-
tation.

Hence, judgment was entered in favor of ITT with a nondischargeable judgment against the debtor for the full amount of the loan. ITT Financial Services v. Gary Szczepanski, 139 B.R. 842.

Author: Charles R. Harroun, Attorney at Law