Skip to main content
Home

Main navigation

  • NC Bankruptcy Cases
    • Eastern District
    • Middle District
    • Western District
  • NC Courts
    • 4th Circuit Court of Appeals
    • NC Court of Appeals
    • NC Business Court
    • NC Supreme Court Cases
  • Federal Cases
  • Law Reviews & Studies
    • Book Reviews
  • NC Legislative History
  • Student Loan Debt
User account menu
  • Log in

Breadcrumb

  1. Home
  2. Blogs

M.D.N.C.: DFWMM Holdings LLC v. Richmond- Reliance on Attorney as Affirmative Defense to Fraudulent Intent

Profile picture for user Ed Boltz
By Ed Boltz, 21 May, 2021

Summary:

DFWMM Holdings sought to have its judgments determined to be nondischargeable and the Mr. Richmond's discharge denied, supporting its allegations by arguing that Mr. Richmond made false statements in the bankruptcy case by failing to disclose that his claimed exemptions had been rejected in state court, that he misrepresented the nature and value of his business, his income and failed to disclose assets, including a Harley Davidson. Mr. Richmond answered in the bankruptcy court ( Richmond did not file any brief in the district court appeal) that to the extent these were failures, that he did not have any fraudulent intent as he had relied on the advice of counsel in preparing his bankruptcy petition.

The district court, affirming the bankruptcy decision, held that reliance on counsel is an affirmative defense that "absolves a debtor of fraudulent intent" when two conditions are met:

  1. The attorney was fully informed at the time the advice was given; and
  2. The debtor's reliance on the advice was reasonable.

Further, the district court found that the bankruptcy court had sufficient basis for finding that while Mr. Richmond made certain false statements, those were not made with fraudulent intent, as the bankruptcy petition was prepared by the attorney, who certified (as all petitions require) that he had "no knowledge after an inquiry that the information in the schedules filed with the petition is incorrect."

Commentary:

While this case presents an opportunity for debtors to extricate themselves from allegations of fraudulent intent in false statement, it does place the debtor's attorney in a real ethical dilemma, as this affirmative defense does require that the attorney fall on their sword. While this would obviously not succeed where the debtor and attorney were colluding to make false statements, it might require that the attorney, with knowledge of the full facts, made mistaken legal decisions, potentially leading to a malpractice claim (which might be an asset of the bankruptcy estate) or worse. Whether the attorney can continue to represent a debtor with that potential conflict of interests is a further concern.

Those issues aside, the defense of reliance on an attorney could be raised against an assertion that a bankruptcy plan was proposed in bad faith, particularly as such plans in consumer cases are overwhelmingly the sole product of the attorney, with the unsophisticated debtor utterly relying on that lawyer's expertise.

For a copy of the opinion, please click here:

DFWMM-v.-Richmond-DistrictDownload

For a copy of the bankruptcy court opinion, please click here:

DFWMM-v.-Richmond-BKDownload

Blog comments

Category
Middle District
Federal Cases

About Us

Mountain View The purpose of the NC Bankruptcy Expert blog is to provide legal professionals with a consolidated resource for updates and case summaries about issues and decisions affecting bankruptcy, foreclosures, mortgages, and debt collection.

 
Lawyer Edward Boltz | Top Attorney Chapter 7

NC Bankruptcy Expert FREE Consultation

We Offer A Free Bankruptcy Consultation which has helped over 70,000 North Carolina families. We serve the entire state of North Carolina.

Proud Member of:












Categories

  • 4th Circuit Court of Appeals
  • Book Reviews
  • District Courts
  • Eastern District
  • Ed Boltz: Bankruptcy Attorney
  • Federal Cases
  • Forms
  • Home
  • Law Reviews & Studies
  • Middle District
  • Mortgage Modification Mediation Documents
  • NC Business Court
  • NC Court of Appeals
  • NC Courts
  • NC Supreme Court Cases
  • News
  • North Carolina Bankruptcy Cases
  • North Carolina District Court Cases
  • North Carolina Exemptions Legislative History
  • Student Loan Debt
  • Student Loan Options and Chapter 13 Bankruptcy
  • Western District
RSS feed
v. 1.2.2, © 2013-2025 ncbankruptcyexpert.com, all rights reserved. Follow @edboltz