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In In re Rankin (Liberty Bail Bond Agency v. Rankin), No. AP 22-04038, 2022 WL 17742293 (Bankr. D. Minn. Dec. 16, 2022), the bankruptcy court granted debtor/defendant’s motion to dismiss the claim for a debt to be nondischargeable under 11 U.S.C. § 523(a)(2)(A).

In its complaint, the plaintiff alleged that it relied upon debtor’s knowingly false statement she could repay a bail bond in monthly installments of $150.

For the present motion to dismiss, the bankruptcy court determined the plaintiff only sought relief under § 523(a)(2)(A), which makes clear it only applies to “false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s . . . financial condition.” § 523(a)(2)(A) (emphasis added). A statement respecting the debtor’s financial condition has “a direct relation to or impact on the debtor’s overall financial status.” Lamar, Archer & Cofrin, LLP v. Appling, 138 S. Ct. 1752, 1761 (2018). In other words, if the allegedly false statements relate to the debtor’s financial status, then a creditor must pursue relief under § 523(a)(2)(B). See In re Ophaug, 827 F.2d 340, 342-43 (8th Cir. 1987) (explaining the two subsections of § 523(a)(2) are mutually exclusive).

For the present motion, the bankruptcy court concluded that the statement the plaintiff allegedly relied upon was respecting the debtor’s financial condition. Thus, the bankruptcy court held § 523(a)(2) was inapplicable.

The bankruptcy court granted the motion to dismiss and ordered the adversary proceeding dismissed with prejudice.

Editors-in-Chief
C.J. Harayda, Stinson LLP
David M. Tanabe, Winthrop & Weinstine, P.A.