Bankruptcy: Dischargeability - Money Judgment

     In the case of In Re: James H. Harris the United States Bankruptcy Court for the Eastern District of Virginia showed a willingness to assist creditors in clear abuse cases. In Harris Judge Tice determined that a debt which resulted from the debtor's conversion of a stolen Mack Truck was exempt from discharge pursuant to the Bankruptcy Code, and determined that the amount of damages excepted from discharge was $11,620.47. The Bankruptcy Court also entered a money judgment for the creditor in that excepted amount, even though at least one Federal District Court has held that a Bankruptcy Court does not have jurisdiction to enter a money judgment in a Bankruptcy Code §523 proceeding.
     Judge Tice stated that every determination by a Bankruptcy Court of the validity of a claim is a determination of whether a creditor is entitled to monetary damages from the debtor. The issues raised regarding the validity or existence or amount of a debt are inextricably interwoven with the determination of dischargeability, and are therefore within the equitable jurisdiction of the Bankruptcy Court.

Collections: Fraudulent Conversion or Removal of Property Subject to Lien or Title

     If a creditor is a lien holder, that creditor should be aware of a lesser known remedy available if a debtor fraudulently sells, removes, or hides the property subject to the lien. Virginia Code §18.2-115 states that a debtor is guilty of larceny if he/she fraudulently sells, pledges, pawns, removes from the premises agreed upon, removes from Virginia, disposes of, or hides the property subject to a lien without the written consent of the owner or lienor or the person in whom the title is, or, if the writing is a deed of trust, without the written consent of the trustee or beneficiary in such deed of trust. Unlike civil fraud, this statute’s fraud contemplates an act by a debtor intended to deprive a secured creditor of his collateral by appropriating it to the debtor’s own use.
     There must be proof that the debtor’s fraudulent intent was directed against the lienor or person in whom the title is. The statute also states that failure or refusal to disclose the location of the property or surrender the property shall be prima facie evidence of a violation of this statute. In Lewis v. First National Bank, the Fourth Circuit clarified that even the existence of written permission to remove the collateral is immaterial under this section, as the creditor need not show the lack of such permission to make out a prima facie case.
     The final provision of the statute provides that the venue of prosecution against persons fraudulently removing any such property, including motor vehicles, from the Commonwealth shall be the county or city in which such property or motor vehicle was purchased or in which the accused last had a legal residence.
     Debtors may argue that the debtor did not actually receive the demand for return of the collateral; however, in Lewis, failure to leave a functional forwarding address or contact with the creditor constituted a waiver of the debtor’s right to deny that the demand was made.
     Debtors have also argued that criminal charges such as these cause emotional distress or are extreme and outrageous. In Lewis¸ the Fourth Circuit stated that creditors should not be fearful of a debtor’s claim that these charges cause emotional distress. To hold such would render the statute useless, which was not intended by the legislature. The court held that the initiation of criminal proceedings against someone under this section with probable cause is not extreme or outrageous as a matter of law.