08-16947-7 In re Casper

Listen to this article

Bankruptcy
Discharge; exceptions; misrepresentation

Where both the debtor and the creditor were engaged in a property flipping scheme, the creditor’s reliance on the debtor’s misrepresentations was not reasonable, and the debt can be discharged in bankruptcy.
“It is also true that the fresh start offered by the bankruptcy code is limited to the ‘honest but unfortunate debtor.’ Grogan v. Garner, 498 U.S. 279, 287, 111 S. Ct. 654, 112 L. Ed. 2d 755 (1991). However, the fact that the defendant promoted the ‘flipping’ of real estate does not itself justify a finding of fraud. Exceptions to discharge are to be construed strictly against a creditor and liberally in favor of the debtor. Chambers, 348 F. 3d at 654. An action based on fraud contemplates reliance upon a material misrepresentation or omission. Mayer, 51 F.3d at 676 (7th Cir.1995) (‘Reliance means the conjunction of a material misrepresentation with causation in fact.’); see also Bombardier Capital, Inc. v. Dobek (In re Dobek), 278 B.R. 496, 505 (Bankr. N.D. Ill. 2002); Rae v. Scarpello (In re Scarpello), 272 B.R. 691, 700 (Bankr. N.D. Ill. 2002). The only reasonable conclusion to draw from the facts is that the plaintiff did not justifiably rely upon a material misrepresentation regarding the Texas properties. His personal background and experience, together with the specific circumstances of the transaction, illustrate to the contrary. The specific use of the funds was irrelevant; the plaintiff was far more interested in the timing of his proffered return on his investment. Put simply, the plaintiff has not demonstrated there is a genuine issue of material fact as to whether the defendant obtained money by false pretenses, a false representation, or actual fraud. Lazzaro v. Weichman (In re Weichman), 422 B.R. 143, 154 (Bankr. N.D. Ind. 2010). Accordingly, the defendant’s motion for summary judgment should be granted and the complaint dismissed.”

08-16947-7 In re Casper

W.D.Wis., Utschig, Bankr. J.