Credit Card Charges Held Nondischargeable
Court rules Credit Card Charges Nondischargeable. In this case, the debtor used her VISA card for cash advances in excess of $4,000. The cash advances were used to pay past due house payments as well as other past due debts. A small portion of the cash advances were used to pay for gambling at the local dog track.At the time debtor placed said cash advances on her VISA card, she and her husband had already amassed some $29,000 in other credit card debts.
The VISA creditor filed an adversary complaint alleging the debtor committed fraud under the Bankruptcy Code and upon the creditor by obtaining the cash advances without the intent or ability to repay the obligations.
The issue addressed by this case is whether the use of a credit card by the debtor implies a representation that the debtor has both the intent and ability to repay the debt.
A majority of the courts have adopted what is known as the “implied representation doctrine,” which states that a debtor does make a representation of intent and ability to repay charges.
Here, the court found that the debtor incurred the VISA debt at a time when she was already insolvent. The debtor made no payments towards the charges. The court held that when the charges were incurred, debtor neither had the ability nor intent to repay.
Thus, this debt was nondischargeable. Household Card Services/VISA v. Laura Vermillion, 136 B.R. 225.