The U.S. Supreme Court heard oral argument yesterday in Lamar, Archer & Cofrin, LLP v. Appling, a case from the 11th Circuit regarding the bankruptcy dischargeability exceptions in 11 U.S.C. § 523(a)(2). Locally, Appling is important because it originated across the street–literally–in Chief Bankruptcy Judge James P. Smith’s courtroom here in the Middle District of Georgia. Our firm is also proud to call Judge Smith an alum. Nationally, even in a week filled with other “blockbuster” opinions and arguments, Appling is important because it highlights a split between the 11th and 4th Circuits, on the one hand, and the 5th, 8th, and 10th Circuits, on the other hand.
Basically, what happens if a debtor lies to a creditor about a particular asset, obtains money or services based on that lie, and then files bankruptcy–should the debt to that creditor be discharged? If you agree with Judge Smith, then a lie about a single asset is not a lie “respecting” the debtor’s “financial condition.” Thus, that lie falls under § 523(a)(2)(A) and may serve as a dischargeability bar. If you agree with the 11th Circuit, then a lie about a single asset can be a lie “respecting” the debtor’s “financial condition.” Thus, that lie falls under § 523(a)(2)(B) and may only serve as a dischargeability bar if, among other things, the lie is in writing.
Those are the issues that the Supreme Court grappled with yesterday, with Gregory Garre arguing for Lamar, Archer & Cofrin, LLP, Paul Hughes arguing for Appling, and Jeffrey Sandberg arguing for the Department of Justice, as amicus curiae, in support of Appling.
As with any bankruptcy issue that reaches the Supreme Court, much has already been written about Appling. Thus, we’ll simply point you to the pertinent links:
We’ll be on the lookout for the final decision.