Richard Barkasy Published “Supreme Court Says Creditors Must ‘Get It in Writing’”

On June 4, the U.S. Supreme Court sent a clear message regarding the requirements for non-dischargeability under the Bankruptcy Code, holding that a debtor’s misleading statement to a creditor regarding a single asset was a statement “respecting the debtor’s . . . financial condition” which must be in writing to render the resulting obligation non-dischargeable. At issue in Lamar, Archer & Cofrin, LLP v. Appling was the language of Section 523(a)(2)(b) of the Bankruptcy Code which requires misstatements “respecting the debtor’s or an insider’s financial condition” to be made in writing in order for the resulting obligation to be considered non-dischargeable in bankruptcy.

On appeal to the Supreme Court, Lamar argued that the phrase “respecting the debtor’s . . . financial condition” should be read narrowly to include only misstatements regarding a debtor’s overall financial status. However, the Supreme Court agreed with Appling that because a debtor’s statement regarding a single asset implicates the sum of the debtor’s assets and liabilities, such a statement falls within the purview of Section 523(a)(2)(b) and must be reduced to a writing to trigger non-dischargeability.

Read the full alert online here.