“Financial condition” exception to fraud nondischargeability

The bankruptcy case of Bandi v. Becnel involved a dispute as to whether a debt was nondischargeable because it arose from fraud, or whether it fell within an exception for statements about “financial condition” in 11 U.S.C. § 523(a)(2)).  No. 11-30654 (June 12, 2012).  The Court found that the phrase “financial condition” should be construed “to connote the overall net worth” of the debtor, and thus did not include “[a] representation that one owns a particular residence or a particular commercial property” because the property could be subject to liens or other liabilities.  Op. at 8.  The Court reviewed a substantial body of law from its prior opinions, other Circuits, and the Supreme Court about the intricacies of this statute and other related provisions of the Bankruptcy Code.

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