A creditor who claims that debt owed by bankruptcy debtor is not dischargeable must establish clearly that debtor legally owes the debt. The circumstances we are talking about involve a debtor who has filed for bankruptcy and a creditor who has filed an adversarial complaint in the bankruptcy objecting to the discharge of an alleged debt owed by the debtor to creditor. A simple example of this principle is A lends $50,000 to B’s 21 year old son who says that he borrowed the money to invest in the construction business of B’s father. Because of the recession, B’s father’s business fails forcing his father to file for Chapter 7 bankruptcy. A then files an adversarial complaint in B’s father’s bankruptcy objecting to discharge of the $50,000 lent to B. As you can see, there is a problem with respect to the legal liability of father to A because the money was lent to son not to father. Son owes A $50,000. It is son who has the legal liability to repay A. Father has no legal liability to repay A even though the $50,000 went into father’s construction business. At best the legal liability of father to A is ambiguous and cannot be clearly established. As a result, A’s adversarial complaint will fail because A will not be able to clearly establish that father owes him $50,000 for money that A lent to B.

In Maloney v. Harte, the plaintiff and the debtor husband were shareholders in a closely-held Honduran corporation. They decided to build an ocean front condominium complex in 1999. Plaintiff agreed to provide the financing for the project. Debtor was to act as the building contractor. In other words, plaintiff was going to finance the purchase of materials and provide financing for the entire project. The project was not completed. Debtor alleged that plaintiff failed to provide adequate financing preventing the completion of the project. Plaintiff alleged that debtor misappropriated property. Debtor countered that plaintiff set fire to his car, stole valuable papers out of his safe, and held him and his wife at knifepoint while brandishing a semi-automatic weapon. Was plaintiff arrested in the last round up of mafia personnel in New York and New Jersey or was plaintiff the son of a Columbian drug lord?

《楊清泉律師專欄》CREDITOR MUST CLEARLY ESTABLISH LEGAL LIABILITY OF BK DEBTOR (Part II)