January 21, 2020

Credit Card Company Loses a Discharge Action

My friend, attorney Howard Rothbloom, recently emailed me about his victory over MBNA in a discharge complaint filed against his client. In the MBNA vs. Horrocks case, the debtor had charged over $2,400 on his MBNA credit card less than one month prior to filing Chapter 7 bankruptcy.

MBNA’s lawyers filed an Adversary Complaint against Mr. Horrocks alleging (1) that he committed “actual fraud” pursuant to Bankruptcy Code Section 523(a)(2) and (2) that these charges were made within the 60 day “presumption of non-dischargeability period” set out at Section 523(a)(2)(C). Howard smartly noted, however, that the Complaint filed by MBNA was lacking in detail. It contained a number of allegations, but offered no proof.

Howard challenged MBNA by filing discovery materials including requests for admissions, which MBNA failed to answer. When a party fails to answer requests for admissions, those admissions are deemed “admitted.” Further, Howard cited a Northern District of Georiga case which held that “actual fraud” means more than using the credit card. The creditor must present evidence showing that the debtor had actual, subjective fraudulent intent. It appears that MBNA and its counsel felt that they could win simply on the fact that the debtor used his credit card shortly before filing. And, more likely than not, if they had made the effort, they very well might have won. But Judge Bonapfel sent a message to MBNA and other creditors – creditors need to produce evidence to prove their cases. Congratulations to Howard for holding the line, especially in light of the many anti-debtor provisions of the new law.

UPDATE: Attorney Susan Gantt recently emailed to update me that Judge Bonapfel has issued his order awarding debtor’s counsel Howard Rothbloom over $3,000 in attorney’s fees pursuant to Bankruptcy Rule 9011. Because creditor’s counsel failed to respond to the debtor’s discovery motions or his motion for summary judgment, the Bankruptcy Code requires that the Court impose sanctions against the creditor (MBNA) and its local counsel.

About Jonathan

Jonathan Ginsberg represents honest, hardworking men and women in the Atlanta area who need personal bankruptcy protection. In practice for over 25 years, Jonathan teaches bankruptcy law and practice at legal continuing education seminars and he is a founding member of the Bankruptcy Law Network. Jonathan lives with his wife and children in Atlanta.


  1. While the plaintiff need to present evidence to back up its case, here the debtor prevailed because the creditor did not respond to the motion for summary judgment, thus making it unopposed. Without disparaging debtor’s counsel, the Judge does not need to make new law when one party fails to respond to discovery or oppose the motion. The news would have been if the debtor has lost the motion.

  2. Steve, you are, of course, correct about the reason the debtor was successful. However, what is important here is that the debtor’s bar needs to be willing, on occasion, to challenge objections filed by creditors. It would appear that the creditors’ counsel here has never had one of her form complaints challenged. Howard took on the challenge and when he caught the creditor napping, he won.

    I suspect that this particular creditor’s counsel will not make this same mistake again, but I think it is healthy for debtors to challenge assumptions. Sometimes a recent use of credit is not wrongful. And sometimes creditors will not be able to prove that a debtor’s conduct should result in a non-dischargeability decision.

    Unfortunately most debtors do not have the funds to finance this type of litigation but without these types of challenges, the creditors and their representatives will use this type of litigation to squeeze money out of honest but unfortunate debtors.

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