Case Summary:
Creditor sought determination that its claims against the debtors were nondischargeable. The creditor alleged that the debtors had misrepresented the existence of certain accounts receivable which served as the borrowing base of a line of credit. The court found that, under the facts of the case, the debtors’ loan obligation was not a factoring arrangement but a capital loan. The debtors did not “obtain” an extension of credit from the plaintiff through the use of the allegedly fraudulent borrowing base certificates. At most, the certificates induced the creditor to forbear collection activities, but it did not surrender or lose any legal rights as a result of its reliance on the documents. The debtors also did not engage in fraud in a fiduciary capacity or harm any property interest of the plaintiff. The plaintiff’s claim was discharged.

Statute/Rule References:
11 U.S.C. § 523(a)(2)(A) -- Nondischargeability - Fraud
11 U.S.C. § 523(a)(4) -- Nondischargeability - Fraud in Fiduciary Capacity
11 U.S.C. § 523(a)(6) -- Nondischargeability - Willful and Malicious Injury