A debtor in a bankruptcy case had been romantically involved with a woman years before filing for bankruptcy. He needed money and asked the woman to lend him $30,000. The woman agreed and asked him to write up a list of his property. He did so, and the woman’s attorney prepared a loan agreement and attached the debtor’s property list. The list included personal items and items from the man’s landscaping business. Five years later, the debtor had repaid less than $5,000 before he defaulted. The woman then sued the debtor and secured a default judgment for $137,030.78.
The debtor then filed for Chapter 7 bankruptcy. The woman filed an adversary proceeding against the debtor, asking the court to declare the debt non-dischargeable. She argued the debt was exempt from the debtor’s dischargeable debts under 11 U.S.C 523(a)(2)(B). The debtor moved to dismiss her claim. The woman then attempted to add a claim under 11 U.S.C. 523(a)(2)(A). The court dismissed the woman’s claim, and she appealed.
Discharges in Bankruptcy Claims
Not all of a debtor’s debts are discharged (releasing the debtor from personal liability) in bankruptcy cases. In a Chapter 7 bankruptcy case, there are certain kinds of debts that are excepted from discharge. That means that the debtor still has to repay those debts after bankruptcy. For example, debts for child support and alimony cannot be discharged, as well as most student loan debts (unless undue hardship is proven through a separate proceeding). Some of the non-dischargeable debts apply automatically, while others have to be requested by creditors in order to be exempt.