Section 523(a)(2)(A) of the Bankruptcy Code prohibits debtors from discharging debts for money, property, services, or credit obtained by false pretenses, a false representation, or actual fraud other than a statement respecting the debtor’s financial condition. Under § 523(a)(2)(B), if those debts are obtained by a statement respecting the debtor’s financial condition, then the statement must be in writing for the debt to be discharged. A conflict among the circuit courts arose as to whether a statement about a single asset can be a statement respecting the debtor’s financial condition. The majority of the courts applied a narrow interpretation to the phrase whereas the minority of courts followed a broad interpretation. In Lamar, Archer & Cofrin, LLP v. Appling, the United States Supreme Court was presented with the opportunity to resolve the dispute and, agreeing with the broad interpretation, held that a statement regarding a single asset may be a statement respecting the debtor’s financial condition. This Note argues that although the broad interpretation is correct when considering only the text and legislative history of the Bankruptcy Code, its application will lead to unfavorable consequences. Therefore, this Note suggests that the Supreme Court should consider the totality of the circumstances, specifically: (1) the sufficiency and intent of the debtor’s oral statements; (2) the amount of money a creditor is owed; and (3) the sophistication of the parties.
The Devious Debtor: 11 U.S.C. § 523(A)(2)(B) and the Need for a More Equitable Outcome,
13 Brook. J. Corp. Fin. & Com. L.
Available at: https://brooklynworks.brooklaw.edu/bjcfcl/vol13/iss1/11