Florida Bankruptcy Court denies 523 complaint

A Florida bankruptcy judge recently took up a 523(a)(2) complaint but denied that the debt in question was a fraud exception to discharge.

In Loud v. Richie, 2007 WL 4644663, Bankr.M.D.Fla (December, 2007), an unscheduled judgment creditor failed to prove by a preponderance of the evidence that the Chapter 7 debtor, from whom they had purchased their 70-year- old home prepetition, made any misrepresentation regarding the condition of the home with the intent to deceive them. Therefore, the judgment debt was not of a kind specified in 11 U.S.C.A. 523(a)(2)(A), the discharge exception for actual fraud, and it did not fall within 523(a)(3)(B), the discharge exception for unlisted or unscheduled debts. Although the judgment creditors presented evidence that the home’s original porch had deteriorated, that tie- backs should be installed to stabilize the basement walls, that groundwater had intruded into the basement, and that permits were not obtained for all contracting jobs completed on the property, they failed to show that the debtor was aware of the conditions at the time of the sale, and that he misrepresented or actively concealed them with the intent to deceive the judgment creditors.



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