October 22, 2019

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.

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