Statutory Interpretation – Bankruptcy

Listen to this article

United States Supreme Court

Case Name: Lamar, Archer & Cofrin, LLP v. Appling

Case No.: 16-1215

Focus: Statutory Interpretation – Bankruptcy

The Bankruptcy Code prohibits debtors from discharging debts for money, property, services, or credit obtained by “false pretenses, a false representation, or actual fraud,” 11 U. S. C. §523(a)(2)(A), or, if made in writing, by a materially false “statement . . . respecting the debtor’s . . . financial condition,” §523(a)(2)(B).

This case is about what constitutes a “statement respecting the debtor’s financial condition.” Does a statement about a single asset qualify, or must the statement be about the debtor’s overall financial status? The answer matters to the parties because the false statements at issue concerned a single asset and were made orally. So, if the single-asset statements here qualify as “respecting the debtor’s financial condition,” §523(a)(2)(B) poses no bar to discharge because they were not made in writing. If, however, the statements fall into the more general category of “false pretenses, . . . false representation, or actual fraud,” §523(a)(2)(A), for which there is no writing requirement, the associated debt will be deemed nondischargeable. The statutory language makes plain that a statement about a single asset can be a “statement respecting the debtor’s financial condition.” If that statement is not in writing, then, the associated debt may be discharged, even if the statement was false.

Affirmed

Dissenting:

Concurring:

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.