In Re: Silva; Ford Motor Credit Co. LLC v. Silva
11 United States Code §523 provides that a debt may not be dischargeable, if the debt results from "false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition." In 2008, the debtor signed a retail installment contract with FMC, or Ford Motor Credit, to purchase a truck and granted FMC a security interest. The contract provided, "You may not sell or rent the vehicle, and you must keep it free from the claims of others." In 2010, the debtor filed for Chapter 7 bankruptcy protection. FMC filed a claim against the debtor and asked the Bankruptcy Court to find that the debt for the truck was not dischargeable in bankruptcy. The Bankruptcy Court found that the debtor allegedly transferred the truck to his employee, Edgar Goldinho, and that Goldinho only made six or seven payments to the debtor, before he and the truck disappeared. The debtor owes FMC $39,800. FMC obtained relief from the automatic bankruptcy stay and was unable to repossess the truck. Although a debt may not be dischargeable on the grounds of "actual fraud," pursuant to 11 U.S.C. §523(a)(2)(A), FMC only proved that there was an "involuntary forbearance" when the debtor failed to inform it about the transaction with Goldinho. An involuntary forbearance, wrote the Bankruptcy Court, does not qualify as an "extension, renewal, or refinancing of credit," under the statute. Furthermore, although a debt may not be dischargeable as a result of "fraud or defalcation while arising in a fiduciary capacity," under 11 U.S.C. §523(a)(4), the debtor did not qualify as a fiduciary. FMC also failed to prove embezzlement or larceny. Although a debt may not be dischargeable, if the debtor engages in "willful and malicious injury . . . to another entity or to the property of another entity," the court found that FMC did not prove that the debtor "willfully" intended to deprive FMC of its collateral, pursuant to 11 U.S.C. §523(a)(6). FMC failed to prove that the $39,800 debt was not dischargeable in Chapter 7, and the court granted judgment to the debtor.