SCOTUS Finds Section 523(a)(2)(B) Financial Condition Can Relate to a Single Asset

On Behalf of | Jun 11, 2018 | Uncategorized |

In a June 4, 2018 decision, the Supreme Court of the United States (“SCOTUS”) held that a “statement in writing . . . respecting the debtor’s or an insider’s financial condition” in Bankruptcy Code Section 523(a)(2)(B), which requires the statement to be in writing, can relate to a single asset and does not have to be a financial statements regarding all of the debtor’s assets and liabilities. 

In Lamar, Archer & Cofrin, LLP v. Appling, No. 16-1215, the debtor told his attorney he could cover his past due balance with an expected tax refund. When the debtor obtained the refund, however, he did not use it to pay the attorney. Later, he again told the attorney he would pay his balance with his tax refund, knowing full well he had already spent it. Based on the debtor’s representations, the attorney continued to do work for the debtor without the past due balance being paid. The debtor then filed for bankruptcy and the attorney sued the debtor for non-dischargeability under Section 523(a)(2)(B). Section 523(a)(2)(B) provides a debt is non-dischargeable where it was obtained by the use of a statement in writing respecting the debtor’s financial condition. The entire SCOTUS opinion centered around the meaning of “respecting.” The SCOTUS spent a lot of time looking at the definitions of “respecting” and its synonyms. The bankruptcy court and district court sided with the attorney but the 11th Circuit reversed and the SCOTUS agreed, finding that “a statement about a single asset can be a ‘statement respecting the debtor’s financial condition’ under §523(a)(2).” Good news for debtors because it broadens what financial statements must be in writing, limiting what statements can be found to be non-dischargeable.

For the full opinion, click here . If you have questions about the foregoing, please contact Melissa Lowe or any of the other attorneys at Shulman Bastian Friedman & Bui LLP at 949-340-3400.

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