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17
Nov
2021

False Application: Nondischargeable Debt

False loan application results in nondischargeable debt.

Here, debtor submitted a loan application to the bank and represented that he and his wife were on the title of debtor’s residence. In fact, the residence was only found to be titled in debtor’s wife’s name.

Thereafter, debtor filed an individual Chapter 7 bankruptcy and the bank filed an adversary proceeding alleging the debtor made a false representation concerning ownership of the residence which should render the debt to the bank nondischargeable.

The court found that the debtor knew at the time he submitted the disputed financial statement that it was inaccurate with regard to the state of title of the personal residence.

This being so, there is really no overriding need to delve into his subjective state of mind as to his motive or why he left that false statement on the financial statement submitted to plaintiff.

The court determined that this debtor had a present and personal knowledge that the financial statement he submitted to the bank was false as a matter of fact.

Hence, debtor’s obligation to the bank was found to be nondischargeable. Shawmut Bank v. Bruce Lyons, 153 B.R. 95.

EDITOR’S COMMENT

This court noted that debtor’s intent to deceive is difficult to prove, however, debtor’s actual knowledge that the statement was false at the time it was proffered was sufficient to meet the burden of proof to establish intent.

Author: Charles R. Harroun, Attorney at Law



This entry was posted on Wednesday, November 17th, 2021 at 8:51 am and is filed under Bankruptcy, National. 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.

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