611 B.R. 657
9th Cir. BAP2020Background
- Blake and India Mcharo applied for TANF benefits in August 2011 and signed forms promising to provide true information and to report income changes within ten days.
- Blake began working for Rent‑A‑Center on October 13, 2011 and worked through June 30, 2012; he did not notify DHS of this change and did not sign any post‑application employment‑change forms.
- India submitted interim forms during this period that indicated no one in the household worked and omitted listing Blake as having earned income.
- DHS later assessed an overpayment, collected $1,276, and recorded distraint warrants showing a $3,843 balance; the Mcharos filed chapter 7 in April 2018.
- DHS sued under 11 U.S.C. § 523(a)(2) to except the debt from discharge; the debtors failed to answer, default was entered, and the bankruptcy court entered judgment against India but denied judgment against Blake, reasoning his omission was an unwritten "statement respecting financial condition" excluded from § 523(a)(2)(A).
- The BAP vacated the judgment for Blake and remanded, holding that a debtor’s failure to disclose a change in employment is not a "statement respecting financial condition" under § 523(a)(2)(A) and directing the bankruptcy court to decide the remaining § 523(a)(2)(A) elements on remand.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a debtor's failure to disclose a change in employment is a "statement respecting financial condition" that falls outside § 523(a)(2)(A) | DHS: omission in face of duty to report is fraud under § 523(a)(2)(A); omission can support nondischargeability | Blake: omission counts as nonwritten "statement respecting financial condition," so § 523(a)(2)(A)'s representation exclusion bars relief | BAP: omission is not a "statement respecting financial condition"; bankruptcy court erred; vacated and remanded for further § 523(a)(2)(A) findings |
Key Cases Cited
- Lamar, Archer, & Cofrin, LLP v. Appling, 138 S. Ct. 1752 (2018) (construing the phrase "statement respecting financial condition" in § 523(a)(2))
- Husky Int’l Elecs., Inc. v. Ritz, 136 S. Ct. 1581 (2016) (actual fraud under § 523(a)(2)(A) can include schemes without a representation)
- Perrin v. United States, 444 U.S. 37 (1979) (undefined statutory terms take ordinary meaning)
- In re Slyman, 234 F.3d 1081 (9th Cir. 2000) (elements for nondischargeability under § 523(a)(2)(A))
- Citibank (South Dakota), N.A. v. Eashai, 87 F.3d 1082 (9th Cir. 1996) (fraudulent omission where duty to disclose exists may constitute representation)
- In re Apte, 96 F.3d 1319 (9th Cir. 1996) (duty‑to‑disclose omissions can establish reliance and causation)