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04
Feb
2019

Reasonable Reliance on Loan Application

Here, debtor applied for and received a loan from Shawmut Bank. Debtor’s loan application represented that the debtor was the sole owner of certain real estate; in fact, the debtor’s wife was also titled on the property.

Debtor filed an individual Chapter 7 bankruptcy and listed the bank’s debt in the bankruptcy schedules.

The bank filed an adversary proceeding alleging the debtor submitted a false loan application since debtor’s wife was, in fact, on the title to the real estate that debtor represented was solely owned by himself.

The court found that the bank relied upon the debtor’s loan application and the representation of debtor’s ownership of real estate; the court further found that the debtor “intended” to deceive the bank since he knew the representation was false at the time it was submitted.

The court did not accept debtor’s argument that his representation was a technical error which did not prove his “intent” to deceive.

In conclusion, the court found in favor of the bank and held the outstanding obligation to the bank to be nondischargeable. Shawmut Bank v. Bruce Lyons, 153 B.R. 95.

EDITOR’S COMMENT

This court noted that debtor’s intent to deceive is difficult to prove, however, debtor’s actual knowledge that the statement was false at the time it was proffered was sufficient to meet the burden of proof to establish intent.

Author: Charles R. Harroun, Attorney at Law



This entry was posted on Monday, February 4th, 2019 at 4:32 am and is filed under Bankruptcy, National. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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