## Facts

- A creditor (Susan Baker) advanced approximately $150,000 to the debtor (Cameron Barrett Sharpe), a longtime friend.
- Baker testified she was influenced by Sharpe’s extravagant lifestyle and by his oral statements that he had assets “hidden” from his former wife that would enable repayment.
- Evidence indicated Sharpe had been considering a Chapter 7 bankruptcy filing for months while some loans were made.
- Sharpe later filed Chapter 7 and denied any intent to defraud, asserting the loans were based on future earning potential rather than concealed assets.
- Baker filed an adversary proceeding seeking to except the debt from discharge under 11 U.S.C. § 523(a)(2)(A) and § 523(a)(6).

## Issues

1. Whether the debt was nondischargeable under 11 U.S.C. § 523(a)(2)(A) based on alleged misrepresentations and conduct tied to Sharpe’s wealth and ability to repay.
2. Whether the debt was nondischargeable under 11 U.S.C. § 523(a)(6) as a willful and malicious injury arising from borrowing and nonpayment.

## Decision

- The court entered judgment for Sharpe and held the debt dischargeable.
- The court ruled Baker did not prove § 523(a)(2)(A) because her theory depended on oral statements and impressions “respecting the debtor’s financial condition,” which are excluded from § 523(a)(2)(A).
- The court further concluded the claim could not proceed under § 523(a)(2)(B) because Baker lacked a materially false written statement of financial condition.
- The court found Baker failed to establish the required reliance and did not prove Sharpe had an intent to deceive when obtaining the loans.
- The court rejected § 523(a)(6) because the record did not show Sharpe deliberately intended to injure Baker or acted with substantial certainty that injury would occur.

## Legal Principles

- Section 523(a)(2)(A) does not cover statements “respecting the debtor’s financial condition”; such theories fall, if at all, under § 523(a)(2)(B), which requires a materially false written statement reasonably relied upon.
- Oral representations about overall wealth, hidden assets, or ability to repay are treated as statements respecting financial condition and cannot support nondischargeability under § 523(a)(2)(A).
- Nondischargeability for fraud requires proof of the creditor’s justifiable reliance and the debtor’s intent to deceive at the time credit is obtained.
- Under § 523(a)(6), “willful” requires an intentional injury, not merely intentional conduct that results in injury; nonpayment of a debt, without intent to harm, is insufficient.
- Exceptions to discharge are construed narrowly, and the creditor bears the burden to prove each statutory element.

## Conclusion

The court held the loans dischargeable because the creditor’s fraud theory rested on oral statements and lifestyle-based impressions about the debtor’s financial condition, lacked the required written financial statement and reliance proof, and did not show an intentional injury necessary for § 523(a)(6).


In re Sharpe, 351 B.R. 409 (Bankr. N.D. Tex. 2006)