Bankr. E.D.N.C.: In re Harris- Debtor Not liable for Student Loans Signed by Mother without Authority

Summary: The Debtor's mother signed the Debtor's signature on 11 student loans.  After filing bankruptcy, the Debtor objected to the validity of the claims. The Court began by reiterating that under 11 U.S.C. § 502(b0, ‘[claims that are unenforceable against the debtor or against property of the debtor . . . are simply not allowable for purposes of a right to share in a distribution of the debtor's assets." In re Easthaven Marina Group, LLC, No. 08-05453-8-JRL (Bankr. E.D.N.C. May 7, 2009) (Leonard, J) (quoting 4 Collier on Bankruptcy (15th ed. rev.) ¶ 502.03[2][b][iii]). Pursuant to N.C.G.S. § 25-3-401, "A person is not liable on an instrument unless (i) the person signed the instrument, or (ii) the person is represented by an agent or representative who signed the instrument and the signature is binding on the represented  person under G.S. 25-3-402." As it was undisputed that the mother signed the notes, the issued turned on whether the mother had been acting as the Debtor's agent.  While such an agency relationship does not need to be in writing, it must be clear and unequivocal.  Instead, the testimony and evidence showed that much of the money from the student loans had, in fact, been used by the mother and not the Debtor. In re Harris- Debtor Not liable for Student Loans Signed by Mother without Authority.PDF