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Bankr. E.D.N.C.: Raleigh Plumbing & Heating v. Lamanna- Dischargeability from Bad Check under 11 U.S.C.§ § 523(a)(2)(A) and (B)

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By Ed Boltz, 18 January, 2013
Summary: In 2005, the Debtor paid Raleigh Plumbing & Heating (“RPH”) by check for a residential remodeling project for which the Debtor was a contractor. RPH confirmed with the Debtor’s bank the availability of funds and completed work. Three days later, RPH received notice that the Debtor had placed a stop payment on the check. RPH brought civil suit against the Debtor later in 2005, obtaining a judgment. In 2011, the Debtor filed Chapter 13 and RPH commenced an Adversary Proceeding seeking to have its claim declared non-dischargeable pursuant to 11 U.S.C. §§ 1328(a)(2), 523(a)(2)(A) and (B). Under § 523(a)(2)(A), a creditor seeking to except a debt from discharge on the basis of fraud must establish the following: (1) false representation, (2) knowledge that the representation was false, (3) intent to deceive, (4) justifiable reliance on the representation, and (5) proximate cause of damages. See Nunnery v. Rountree (In re Rountree), 478 F.3d 215, 218 (4th Cir. 2007). As to the first element, the bankruptcy court held that the issuance of a bad check alone does not constitute a false representation under § 523(a)(2)(A) and thus is not sufficient to render a debt nondischargeable, with RPH bearing the burden of showing that the debtor tendered the check with the intent to deceive RPH. This need not be shown by direct evidence but can be shown by inference from the Debtor’s intent. Here, however, the bankruptcy court found that the Debtor’s acrimonious relationship with the homeowner, which lead to the Debtor’s decision to stop work and then stop payment on the check was, when coupled with the fact that there were sufficient funds, credible evidence that at the time the check was tendered, there was no false representation. As to 11 § 523(a)(2)(B), the bankruptcy court found that a check, standing alone, is not a “statement in writing” relating to the financial condition of the debtor for purposes of § 523(a)(2)(B). For a copy of the opinion, please see: Raleigh Plumbing & Heating v. Lamanna- Dischargeability from Bad Check under 11 U.S.C.§ § 523(a)(2)(A) and (B).pdf

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