Toye v. O’Donnell

Appellant, an experienced real estate developer, defaulted on his personal-guaraty obligations after obtaining a loan for his limited liability company with a "materially false" personal financial statement (PFS). Appellee, the lendor, successfully sued O'Donnell in state court on the personal guaranty. Thereafter, Appellant filed for Chapter 7 bankruptcy protection. Appellee responded by initiating this adversary proceeding in the bankruptcy court, alleging that Appellant's debt to him was nondischargeable under 11 U.S.C. 523(a)(2)(B), which makes debts for money procured by use of a written statement nondischargeble if the statement was "materially false" related to the debtor's "financial condition" and the debtor made it with "intent to deceive." The bankruptcy judge refused to discharge Appellant's debt to Appellee, and the bankruptcy appellate panel (BAP) affirmed. The First Circuit Court of Appeals affirmed, holding that the BAP did not clearly err in its finding that Appellant's act of willfully turning "a blind eye" to the accuracy of the PFS proved his intent to deceive. View "Toye v. O'Donnell " on Justia Law