Here, in ITT Financial Services v. Arthur Suydam, 151 B.R. 436, the debtor owed more than $3,900 to ITT Financial Services on a loan secured by various items of personal property, including a Pentax Camera and lens, snowblower, color television set, VCR, stereo system, a gun, power saw and an electric guitar.

The initial debt was refinanced several times by the debtor and on each occassion the refinanced obligation was secured by the same collateral.

Unbeknownst to the lender, at the time of the last refinance, the debtor no longer had possession of some of the collateral since debtor’s [then former] wife had destroyed some of the items and absconded with other items in the course of a divorce proceeding. The debtor did not inform ITT Financial that some of the items had been destroyed and/or were no longer in his possession.

The debtor’s last refinance loan application with ITT Financial indicated that the debtor owned the items pledged as collateral, knew said items were in good repair and that the collateral had not been transferred to any other party.

The court held that debtor had obtained the loan under false pretenses since debtor did not disclose to the lender the fact that some of the items of collateral had been destroyed or removed by the debtor’s former wife. Held: debt to ITT Financial was nondischargeable in bankruptcy.

Author: By Charles R. Harroun, Attorney at Law