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Bankruptcy – Adversary Action

By: Derek Hawkins//April 11, 2016//

Bankruptcy – Adversary Action

By: Derek Hawkins//April 11, 2016//

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7TH Circuit Court of Appeals

Case Name: Dana Siragusa, et al v. Arturo Collazo

Case No.: 15-2324

Officials: POSNER, EASTERBROOK, and KANNE, Circuit Judges

Focus: Bankruptcy – Adversary Action

Lenders challenge dischargeability of debt for real estate developer.

“The bankruptcy judge also rejected Dana’s claim that Collazo had committed fraud when he transferred the Chicago condo units to new LLCs. (Dana was the only one of the Siragusa offspring who had invested in those units.) The judges assumed that to constitute fraud under 11 U.S.C. § 523(a)(2)(A) a debtor’s false representation must induce the creditor to part with money or property. Dana contends that Collazo committed fraud when he transferred condo units to new LLCs, since the fraud exception to a discharge in bankruptcy encompasses a debtor’s transferring valuable proper‐ ty in order to keep it out of the hands of the creditors entitled to it. McClellan v. Cantrell, 217 F.3d 890, 894–95 (7th Cir. 2000). That may have happened in this case; Collazo may have “rendered the debt uncollectible by making an actually fraudulent conveyance of the property that secured it,” and if so “his actual fraud [gave] rise to a new debt, nondischargeable because created by fraud.” Id. at 895; see also In re Lawson, 791 F.3d 214, 218–22 (1st Cir. 2015). The question whether, as we held in the McClellan case, there can be a fraud without a fraudulent statement (for the fraud we’re discussing is a silent transfer of property rather than a lie) is now before the Supreme Court in Husky International Electronics, Inc. v. Ritz, No. 15‐145, argued on March 1 of this year. Should the Court agree with our analysis in the McClellan case, Dana will be entitled on remand to resuscitate her fraud claim.”

Affirmed in Part

Reversed and Remanded in Part

Full Text


Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.

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