Title
Debtor Needs to have Benefitted from Fraud to be Barred a Discharge Under 11 U.S.C. § 523(a)(2)(A)
Document Type
Research Memorandum
Publication Date
2023
Abstract
(Excerpt)
Title 11 of the United States Code (the “Bankruptcy Code”) provides that a court may grant a debtor a discharge of its debts, subject to certain conditions and exceptions. One exception to dischargeability is set forth in section 523(a)(2)(A), which bars a discharge from debt “for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by . . . false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition.”
A key phrase in the statute is “obtained by” and courts have applied a few different interpretations to this phrase. Further, the Supreme Court has broadly interpreted the “obtained by” requirement, signaling to lower courts that excepting more debts related to fraud from dischargeability is appropriate. This article examines the three interpretations courts have applied to section 523(a)(2)(A) and which is appropriate, especially considering the most recent Supreme Court decision. Part I focuses on the authority section 523(a)(2)(A) grants courts to except certain debts from a discharge and the requirements to fall under this exception. Part II examines two of the Supreme Court interpretations of section 523(a)(2)(A) to demonstrate the extent it is appropriate for lower courts to except certain debts from a discharge under the statute. Part III examines the three interpretations courts have applied to section 523(a)(2)(A) and references how the Supreme Court decisions impact these interpretations.