Legal News for Credit Union Managers Since 1990
« Guarantor Liability Survives Debtor’s Bankruptcy
State Court Judgment – Fraud »
17
Aug
2022

Collateral Conversion By Debtor

Here, the debtors somehow were able to have title to their vehicles issued that did not reflect the creditor’s lien.

Debtors then filed a Chapter 7 Bankruptcy and Sears filed an adversary complaint with the Bankruptcy Court alleging the debtors committed fraud in having the creditor’s lien removed from the title.

A discharge under the Bankruptcy Code does not discharge an individual debtor from any debt for fraud or defalcation while acting in a fiduciary capacity.

The Court condemned the actions of the debtor and found them to be most reprehensible. The Court even assumed that all elements of fraud and defalcation were met by Sears.

However, the Court further found that Sears had failed to provide evidence that the debtor was “acting in a fiduciary capacity.” In addition, the Court found no evidence that the debtor’s wife, who also joined in the bankruptcy, participated in removal of the Sears lien on the vehicles’ titles.

This Court also noted that there was no evidence produced indicating the debtors acted with willful and malicious intent to injure the creditor.

Consequently, the Court held that Sears had not met its burden of proof and the debtors were nonetheless discharged of their debt to Sears. If Sears had produced evidence of the debtors’ “fiduciary capacity”, they could have prevailed.  Sears Consumer Financial Corporation v. Dennis Gibson, 129 B.R. 612.

Author: Charles R. Harroun, Attorney at Law



This entry was posted on Wednesday, August 17th, 2022 at 7:56 am and is filed under Bankruptcy, Secured Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Leave a Reply

Your comment

Powered by WP Hashcash

  • Recently Posted Articles written by: Charels R. Harroun, Attorney at Law

    • False Application: Nondischargeable Debt
    • Truth in Lending Violation: Collateral Not Identified
    • Collateral Removed From State – Renewal of Perfected Lien
    • Credit Union & Its Attorney Violate Bankruptcy Stay
    • Credit Union Employee Policies
    • Wrongful Repossession & Conversion: Creditor Held Liable
    • “Investment” Information Provided to Member
    • Nonischargeable Cash Advances
    • Parental Liability: Minor’s Forged Check
    • Debt Cancellation Insurance
    • Credit Union’s Failure to Payoff Existing Mortgage

  • Website Builder

2009-2020 Copyright Harroun, P.C. | Credit Union Legal Newsletter powered by WordPress and Uchilla
Subscribe: Entries (RSS) and Comments (RSS)