[COLUMN] What is intent to repay in BK debt?

IN one case, the debtor borrowed $100,000 in credit cards, which he used to gamble. He then filed for Chapter 7 to wipe out the $100,000 of credit cards.

The creditors objected on the grounds that he had no intent of repaying his debts because he used the money that he had borrowed to gamble. Debtor showed that he had gambling winnings in the past and testified that he had intended to repay his debts because he would have repaid them if he had won, but he lost. The court agreed that the debtor had intent to repay because in gambling, you have a 50% chance of winning, and the debtor’s intent was to repay his debts if he had won.

In another case, the debtor used her credit cards to buy gift cards totaling $300,000. She then sold these gift cards to her “clients” for a profit but gave those clients an extended payment plan. Business was good until her clients started to default on their payments, then the whole house of cards came crashing down. The debtor could no longer pay back the $300,000. Fortunately, the client had documents to prove what she was doing. The only weak point in the evidence was that her clients were found through the internet.

However, there was enough evidence to prove that what she was saying was true and the court agreed that the debtor had the intent to repay the $300,000.

Intent to repay is crucial in determining if a debt is dischargeable in bankruptcy. Creditors used to object to discharge using the “totality of circumstances” argument. They argued that based on the debtor’s income and expenses and the size of the debt, the debtor knew that he could not repay the debt, therefore, he had no intent to repay. Some courts would agree with the creditor on this argument. However, every case is different from other cases. In other words, just because the court found that there was no intent to repay in one case, it automatically follows that it would also find that there is no intent to repay in a similar case. Each case is different. An experienced BK attorney can advise you accordingly.

If you need debt relief, please set an appointment and I will analyze your case personally.

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DISCLAIMER: NONE OF THE FOREGOING IS CONSIDERED LEGAL ADVICE. EACH CASE IS DIFFERENT.

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Lawrence Bautista Yang specializes in Bankruptcy, Business, Real Estate and Civil Litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 20274 Carrey Road, Walnut, CA 91789 or 1000 S. Fremont Ave., Mailstop 58, Building A-10 South, Suite 10042, Alhambra, CA 91803.

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