Nondischargeable Debt: False Financial Statement
In these two cases, the bankruptcy court entered two nondischargeable judgments against the same debtor in favor of Pittsburgh Police Federal Credit Union and Allegheny County No. 1 Federal Credit Union.
Here, the debtor was a member of both Pittsburgh Police Federal Credit Union (hereinafter “PPFCU”) and Allegheny County No. 1 Federal Credit Union (hereinafter “ACCU”). Debtor’s father was president of PPFCU and his uncle is president of ACCU.
Debtor submitted written loan applications to both credit unions with the expectation that the loans would be approved due to his father’s and uncle’s respective positions at the credit unions.
The loan application submitted to PPFCU stated, in pertinent part:
I AM INDEBTED TO THE FOLLOWING CREDITORS. (LIST ALL DEBTS SUCH AS DOCTOR BILLS, INSTALLMENT LOANS, REAL ESTATE MORTGAGES, ETC. ATTACH ADDITIONAL SHEETS IF NECESSARY.
Debtor listed only one outstanding debt on this application and, debtor acknowledged, failed to list a previously incurred obligation to ACCU. PPFCU’s loan committee approved the loan in the amount of $8,503.49.
Debtor later submitted a loan application to ACCU which stated, in part:
DO NOT OMIT ANY DEBTS! IF MORE SPACE IS NEEDED, USE REVERSE SIDE. INCOMPLETE APPLICATIONS CANNOT BE PROCESSED.
The application submitted to ACCU admittedly failed to list the obligation owing to PPFCU, and ACCU’s loan committee approved an unsecured loan wherein debtor borrowed $7,875.59.
Debtor thereafter filed a Chapter 7 bankruptcy seeking to discharge both obligations. Each credit union filed an adversary proceeding seeking to obtain a nondischargeable judgment.
The court found that debtor’s applications were false and that each credit union reasonably relied on the information contained in the applications. Hence, two nondischargeable judgments were entered against debtor.
Pittsburgh Police Federal Credit Union and Allegheny County No. 1 Federal Credit Union v. Eric Lundy (U.S. Bkcy Court, W.D. Pennsylvania, Case Nos. 93-21173-BM & 93-2355-BM).
Author: Charles R. Harroun, Attorney at Law