67 B.R. 294 | D.R.I. | 1986
Heard on September 12, 1986, on the complaint of manufacturers Hanover Trust Company, pursuant to 11 U.S.C. § 523, to
Manufacturers Hanover Trust alleges that the debtors’ taking of cash advances while they were “hopelessly insolvent,” see Plaintiffs Memorandum of Law at 7, constitutes “false pretenses, a false representation, or actual fraud” within the meaning of § 523(a)(2)(A) to except the debt from discharge.
February 5,1986 $1,000
February 11,1986 1,000
February 13,1986 500
February 19,1986 400
TOTAL $2,900
Less than one month after the last cash advance, on March 18, 1986, the debtors filed a voluntary Chapter 7 petition listing secured claims of $401,641 and unsecured claims of $65,216.
During the time when the cash advances in question were being taken, David Sterling, a commercial fisherman, was unemployed, he had no income and because of engine problems with the boat and, later, his broken leg, was unable to operate his fishing business (except for a three week period during December) since July of 1985. His total secured and unsecured debt is $466,857. See Plaintiff’s Exhibit G, Bankruptcy Schedules. Katherine Sterling was employed as a registered nurse with an income of $294 per week. She also received $425 each month as the beneficiary of a trust. Their then current expenditures were listed as $4270 per month, and their monthly income was $1605.48. See Plaintiff’s Exhibit F, Schedules of Income and Expenditures. Their assets amounted to $116,550. See Plaintiff’s Exhibit G, Bankruptcy Schedules.
After considering the evidence presented at trial, and the oral and written arguments of counsel, we must conclude that the credit card cash advances obtained from Manufacturers Hanpver Trust are nondischargeable. Although the debtors may have had a subjective hope to repay, the result of their incurring this debt while so hopelessly insolvent was to obtain funds which they knew, or should have known, would never be repaid. Their stated monthly expenses
Since there was no reasonable likelihood of the debtors being able to repay this, or any of their then existing debts, their conduct constitutes fraud within the meaning of § 523(a)(2)(A). See American National Bank and Trust Company of Chattanooga v. Daugherty (In re Daugherty), 57 B.R. 99 (Bankr.E.D.Tenn.1985); Central Bank v. Kramer (In re Kramer), 38 B.R. 80 (Bankr.W.D.La.1984). Matter of Schnore, 13 B.R. 249, 257 (Bankr.W.D. Wise. 1981) (incurring the credit card debt when the debtor’s “financial circumstances were such that he could not have reasonably believed that he would pay,” coupled with a failure to make any payments on the debt, established the intent not to pay the debt incurred). Accordingly, the debt owed to Manufacturers Hanover Trust Company in the amount of $3,024.83
Enter Judgment accordingly.
. § 523. Exceptions to discharge.
(a) A discharge under section 727, 1141, or 1328(b) of this title does not discharge an individual debtor from any debt—
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(2) for money, property, services, or an extension, renewed, or refinancing of credit, to the extent obtained by—
(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition;
. 11 U.S.C. § 523(a)(2)(C) makes cash advances aggregating more than $1,000 taken on or within twenty days before the order for relief presumptively nondischargeable. Section 523(a)(2)(C) merely shifts the burden of proof regarding dischargeability to the debtor for cash advances taken within twenty days of filing. It does not prevent the Court from finding that such debts are nondischargeable if the complaining creditor meets its burden of proof under § 523(a)(2)(A) concerning cash advances taken outside this twenty day period.
. David Sterling admitted that if his business debts, which he had personally guaranteed, were added to his monthly expenditures, the total monthly obligation would be approximately $8,000.
. On April 30, 1986 Southern New England Production Credit Association filed a motion to terminate the automatic stay, 11 U.S.C. § 362,
. The total of $3,024.83 includes cash advances of $2,900, accrued interest, and the annual cardholder fee of $20.
. This decision constitutes our findings of fact and conclusions of law. See Bankruptcy Rule 7052 and Fed.R.Civ.P. 52.