Which Financial Representations Will Justify a Discharge Objection after Lamar, Archer?

Since the passage of the Bankruptcy Act of 1898, and particularly since 1926, United States bankruptcy laws have contained a provision that would penalize debtors who use false pretenses or false financial documents to obtain credit. The Supreme Court's decision in Lamar, Archer & Cofrin, LLP v. Appling, 138 S. Ct. 1752, 201 L. Ed. 2d 102 (2018) (Lamar, Archer) has significantly constricted the range and nature of statements that will support a successful objection by a creditor to the discharge of a debt that was obtained by the statements in question. This constriction could have a very real impact on how entities that loan money or provide services on credit review and collect information regarding a borrower's creditworthiness.

The Underlying Statutory Basis for Objecting to the Discharge of a Debt

11 U.S.C. 523(a)(2) currently provides that a debtor cannot obtain a discharge from a debt for money, property, services or an extension or renewal of credit if that debt was incurred or obtained by:

(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition;

(B) use of a statement in writing:

(i) that is materially false;

(ii) respecting the debtor's or an insider's financial condition;

(iii) on which the creditor to whom the debtor is liable for such money, property, services or credit reasonably relied; and

(iv) that the debtor caused to be made or published with intent to deceive.