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Home / Case News / A Creditor Bank Successfully Proves Non-Dischargeability of Debt Under Sec. 523(a)(2)(B) Owing to Debtor’s False Financial Statements

A Creditor Bank Successfully Proves Non-Dischargeability of Debt Under Sec. 523(a)(2)(B) Owing to Debtor’s False Financial Statements

March 20, 2018, Southern TexasCreditor Heritage Bank brought an adversary proceeding against Debtor James W. McCracken to determine the dischargeability of the certain debt owed to it by the debtor. Heritage alleged that McCracken’s debts to it were nondischargeable under 11 U.S.C. §523(a)(2)(B) and, alternatively, 11 U.S.C. §727(a)(3). Heritage moved for summary judgment on its nondischargeability claims. The Court held that Heritage was entitled to summary judgment on its claim under 11 U.S.C.S. §523(a)(2)(B) because the debtor provided the bank with false financial statements and misleading tax returns as part of his applications for credit. Heritage reasonably relied on that information when it decided to make the loans. The Court found that the misrepresentations the debtor made in documents he submitted, including false statements about cattle he claimed he owned, showed a clear pattern of deceitful conduct and gave rise to an inference that he supplied those documents intending to deceive the bank. However, the Court denied the Heritage’s other claim that the debt was also non- dischargeable under 11 U.S.C.S. § 727(a)(3) because § 727(a)(3) was inapplicable to Chapter 13 bankruptcy cases.

Heritage Bank v. McCracken (In re McCracken), Nos. 17-80084, 17-8009, 2018 Bankr. LEXIS 797 (Bankr. S.D. Tex. Mar. 19, 2018)