Exceptions to Discharge: Bankruptcy Overview

Exceptions to Discharge:   11 U.S.C. § 523(a)(2)(A)


Pursuant to Rule 4007(c) of the Federal Rules of Bankruptcy Procedure, a complaint for the determination of the dischargeability of a debt under § 523(a)(2) must be filed within sixty days from the date of the first meeting of creditors, and if a complaint is not filed prior to that

deadline, the underlying debt is discharged. See In re Jenkins, 330 B.R. 625, 629 (Bankr. E.D. Tenn. 2005). Section 523(a)(3)(B) provides the exception to this rule – if a debt falls into within the scope of § 523(a)(2), (4), or (6), and it was not listed or scheduled, and the creditor did not receive or have actual knowledge of the case in time to timely file a complaint to determine dischargeability that would have been successful, the debt is nondischargeable. WebMD Practice Servs. v. Sedlacek (In re Sedlacek), 325 B.R. 202, 210 (Bankr. E.D. Tenn. 2005). 11 U.S.C. § 523(a)(2)(A) provides in pertinent part that:


A discharge under section 727 … does not discharge

an individual debtor from any debt—


(2) for money, property, services, or an extension,

renewal, or refinancing of credit, to the extent

obtained by—


(A) false pretenses, a false representation, or

actual fraud …;


Because § 523(a) is construed strictly against the plaintiff and liberally in favor of the

debtor, the plaintiff bears the burden of proving each of the elements necessary for a determination of nondischargeability by a preponderance of the evidence. Grogan v. Garner, 111 S. Ct. 654, 661 (1991); Rembert v. AT&T Universal Card Servs., Inc. (In re Rembert), 141 F.3d 277, 281 (6th Cir.1998). To establish fraud under section 523(a)(2)(A), five elements must be proven:(1) that the debtor made representations; (2) that at the time the representations were made the debtor knew them to be false; (3) that the debtor made the representations with the intention and purpose of deceiving the creditor; (4) that the creditor relied on the representations; and (5) that the creditor sustained the alleged injury as a proximate result of the representations. Longo v. McLaren (In re McLaren), 3 F.3d 958, 961 (6th Cir. 1993). Material misrepresentations, omissions, and actual fraud all fall within the scope of § 523(a)(2)(A). Haney v. Copeland (In re Copeland), 291 B.R. 740,759 (Bankr. E.D. Tenn. 2003); see also Mellon Bank, N.A. v. Vitanovich (In re Vitanovich), 259 B.R. 873, 877 (B.A.P. 6th Cir. 2001)(“Actual fraud as used in 11 U.S.C. § 523(a)(2)(A) is not limited to misrepresentations and misleading omissions.”). It is important to note that mere breach of contract or failure to perform, without more, does not constitute fraud. See Ellis v. Shear (In re Shear), 123 B.R. 247, 253 (Bankr. N.D.Ohio 1991); Krenowsky v. Haining (Matter of Haining), 119 B.R.460, 463 (Bankr. D. Del. 1990).


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