NCJ Number
47404
Journal
Akron Law Review Volume: 7 Issue: 3, Dated: (SPRING 1974) Pages: 439-456
Date Published
1974
Length
19 pages
Annotation
A PRACTICAL ANALYSIS OF THE NATURE AND HISTORY OF OBJECTIONS TO CONSUMER DEBT DISCHARGES FILED BY SMALL LOAN COMPANIES IS ATTEMPTED.
Abstract
A DISHONEST PRACTICE CAN RESULT IN A SECTION 17 OBJECTION TO DISCHARGE, AN OBJECTION BASED UPON THE DEBTOR'S OBTAINING MONEY OR PROPERTY AFTER PROVIDNG A MATERIALLY FALSE FINANCIAL STATEMENT IN WRITING WITH THE INTENT TO DECEIVE AND CAUSE THE CREDITOR TO GRANT CREDIT ON THE BASIS OF THIS STATEMENT. UNDER BANKRUPTCY LAWS, A DEBTOR WHO FILES A PETITION FOR BANKRUPTCY IS ENTITLED TO A DISCHARGE UPON THE COURT'S ADJUDICATION THAT HE OR SHE IS BANKRUPT, UNLESS HE OR SHE HAS COMMITTED ONE OR MORE SPECIFIED ACTS WHICH NEGATE THE DEBTOR'S RIGHT TO A RELEASE FROM DEBT. IF A CREDITOR CORRECTLY CONTENDS THAT THE BANKRUPT INDIVIDUAL HAS OBTAINED MONEY OR PROPERTY ON THE BASIS OF A MATERIALLY FALSE FINANCIAL STATEMENT, THE CREDITOR'S CLAIM WILL NOT BE DISCHARGED, AND THE DEBTOR WILL REMAIN LEGALLY OBLIGATED TO THAT CREDITOR. THE CONSEQUENCES OF THIS PROVISION ARE DISCUSSED IN REGARD TO PROCEDURES EMPLOYED BY SOME LOAN COMPANIES IN GRANTING CONSUMER CREDIT. THE FOUNDATION OF OBJECTIONS TO DISCHARGE IS OUTLINED. BEFORE MAKING ANY DETERMINATION REGARDING A SECTION 17 OBJECTION, A CREDITOR MUST BE ABSOLUTELY SURE THAT: (1) THE SPECIFIC FINANCIAL STATEMENT WAS MATERIALLY FALSE; (2) MONEY OR PROPERTY HAS BEEN OBTAINED ON THE BASIS OF THIS FINANCIAL STATEMENT; (3) THE CREDITOR RELIED UPON THIS STATEMENT IN EXTENDING CREDIT; AND (4) THE DEBTOR INTENDED TO DECEIVE THE CREDITOR. IT IS NOTED THAT SMALL LOAN COMPANIES HAVE BEEN HARSHLY CRITICIZED FOR CERTAIN UNSCRUPULOUS PRACTICES OF SOME COMPANIES INVOLVING OBJECTIONS TO DISCHARGE. AS A RESULT OF THIS CRITICISM, THE BANKRUPTCY ACT WAS AMENDED IN 1960 TO LIMIT AN OBJECTING CREDITOR'S ABILITY TO NEGATE TOTALLY A CONSUMER BANKRUPT'S RIGHT TO A GENERAL DISCHARGE. AS A RESULT OF THIS AMENDMENT, CONSUMER BANKRUPTS CAN NO LONGER BE REFUSED A GENERAL DISCHARGE ON THE BASIS OF ONE PARTY'S OBJECTION. FURHERMORE, BY VIRTUE OF A 1970 AMENDMENT, BANKRUPTCY COURTS WERE VESTED WITH THE EXCLUSIVE JURISDICTION TO DETERMINE THE DISCHARGEABILITY OF INDIVIDUAL DEBTS. FORMERLY, A DISGRUNTLED CREDITOR COULD SUE IN STATE COURT FOR A DETERMINATION THAT HIS PARTICULAR CLAIM WAS NOT DISCHARGEABLE BECAUSE OF THE DEBTOR'S MISREPRESENTATIONS. THUS, AMENDMENTS HAVE CONFERRED VERY BROAD POWERS UPON REFEREES WHICH MAY OR MAY NOT HAVE BEEN PROPERLY DELEGATED TO THEM. RELEVANT COURT DECISIONS ARE CITED AND DISCUSSED. (KBL)