Understand the complexities and nuances of the Bankruptcy Code to better advise clients and prepare for court.
By Diane Davis
A debtor’s promises of a future relationship and future repayment were fraudulent, and the debt can’t be discharged in bankruptcy, the U.S. Bankruptcy Court for the Western District of Missouri held ( McClammer v. Holmes (In re Holmes) , 2017 BL 149877, Bankr. W.D. Mo., No. 16-41808, 5/4/17 ).
A debtor can’t discharge any debt obtained by actual fraud, Judge Arthur B. Federman wrote May 4.
“Actual fraud” encompasses anything that counts as fraud done with wrongful intent, the court said, citing recent U.S. Supreme Court precedent in Husky Int’l Elecs., Inc. v. Ritz.
Most of the representations made by debtor Landon Holmes to Katie McClammer through their “tortured” relationship were false and done with an intent to deceive her, the court said. McClammer was justified in relying on those representations for most of that time, but at some point, she had to realize that they were false, the court said.
Holmes pursued a romantic relationship with McClammer while both of them were married. McClammer was Holmes’s supervisor at Kansas City Fly Ash.
McClammer later filed for divorce, but Holmes remained married and made no attempt to divorce his wife. However, he told Katie they were “soulmates” and that he wanted to marry her and have children.
McClammer incurred a number of debts at Holmes’s request. She obtained two new credit cards for Holmes to use, gave him tens of thousands of dollars to help facilitate his divorce and for other purposes, and a pickup truck, trailer, and off-road recreational vehicle for him.
They had a joint checking account, from which Landon withdrew more than he put in.
Holmes also convinced Katie to terminate a pregnancy because they weren’t in a “position to have a child,” and later Katie gave Holmes access to her pension funds.
Holmes used the credit cards to purchase major appliances for his home with his wife, and took her on a cruise.
After their relationship ended, McClammer asked the court to determine that Holmes’s debt to her was nondischargeable due to actual fraud under Bankruptcy Code Section 523(a)(2)(A). She also planned to obtain a money judgment in state court.
McClammer was justified in relying on Holmes’s promises until it should have been obvious that he was lying to her—when Holmes charged the cruise with his wife and bought appliances for their home, the court said.
Paul David Wylie represented McClammer; Donald E. Bucher represented Landon and Shera Holmes; Trustee Jerald S. Enslein, Martin Pringle Oliver Wallace & Bauer LLP, represented himself.
To contact the reporter on this story: Diane Davis in Washington at DDavis@bna.com
To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
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