Professor Charles Tabb was quoted in a recent article on Bloomberg Law regarding the case of a debtor who falsely claimed he would pay legal fees with an anticipated $100,000 tax refund, but spent the money on his own business instead. A February 15 decision by the U.S. Court of Appeals for the Eleventh Circuit held that the debtor could still discharge the legal fees in bankruptcy.
Citing Bankruptcy Code Section 523(a)(2)(B), the court determined that as long as the false statement isn't in writing, a debtor can discharge a debt incurred by a false statement respecting his financial condition.
“The Eleventh Circuit's decision makes sense in the overall context of the fraud exception to discharge, and is faithful to what Congress intended in differentiating between statements respecting a debtor's financial condition and all other forms of fraud,” Professor Charles J. Tabb, of counsel, Foley & Lardner LLP and Mildred Van Voorhis Jones Chair in Law, University of Illinois, Champaign, Ill., told Bloomberg BNA Feb. 16.
Full article at Bloomberg Law