In a Chapter 7 Bankruptcy, not all debts are subject to discharge. By way of example, debts or liabilities pertaining to a debtor’s fraud is not subject to discharge. 15 USC Sections 523(a)(2)(A) and 15 USC 523(a)(2)(B) are the two most commonly invoked sections by a plaintiff/creditor when trying to prove a fraud exception in an adversarial bankruptcy proceeding.
Under § 523(a)(2)(A), a plaintiff/creditor has the burden to prove: (1) defendant/debtor made a representation; (2) with knowledge of its falsity at the time it was made; (3) deliberately for the purpose of deceiving plaintiff/creditor; (4) who justifiably relied on the representation; and which (5) proximately caused damage. In re Treadwell, 637 F.3d 855, 860 (8th Cir. 2011).
Section 523(a)(2)(B) has separate but similar requirements. It requires that a plaintiff/creditor prove that: (1) defendant/debtor used a writing; (2) that was materially false; (3) respecting debtor’s/defendant’s financial condition; (4) on which plaintiff/creditor relied on in advancing funds; and which (5) defendant/debtor published with intent to deceive.