In re Blake and India Rose Mcharo

Case Type:
Case Status:
Reversed and Remanded
BAP No. OR-19-1010-LTaF (9th Circuit, Jan 09,2020) Not Published
BAP for 9th Cir. reversed ruling of bankruptcy court (D. Or.) and remanded. Debtor's silence, i.e., failure to disclose that he had obtained employment while procuring unemployment benefits was nondischargeable, notwithstanding 11 USC 523(a)(2)(A)'s exception, and dischargeability, of debts arising from an oral "statement" respecting financial condition. Debtor's nonverbal conduct regarding financial condition, including silence in the face of a duty to disclose, did not constitute "statement" respecting financial condition.
Procedural context:
Federal agency (DHS) sued debtors to except debt from dischargeability pursuant to 11 USC 523(a)(2). Debtors failed to answer, and DHS moved for default judgment. Bankruptcy court (D. Or.) granted motion as to wife, but entered defense judgment in favor of husband. DHS appealed to BAP for 9th Circuit.
In August 2011, Mcharos applied for public assistance cash benefits from the Department of Human Services through the Temporary Assistance for Needy Families program (TANF). The application they signed included representations that they had no income or employment, as well as notices regarding false statements, penalties of perjury, and obligation to repay overpaid benefits, as well as obligation to update information upon change of circumstances. At the time the Mcharos filled out the application, Blake was not working. However, on October 13, 2011, he became employed with Rent-ACenter, Inc. and remained employed there until June 30, 2012. On November 9, 2011, India completed an “Interim Change Report,” continuing to state non-employment and lack of income. At no point after the initial application did Blake sign or submit any document regarding the change in his employment status. All during this period, between September 2, 2011, and June 30, 2012, the Mcharos received TANF benefits. On October 1, 2015, DHS recorded two distraint warrants, one against each of the Mcharos, showing the balance due for overpayment of public assistance benefits plus fees. DHS collected $1,276 from the Mcharos before they filed their chapter 7 petition.The Mcharos filed a joint chapter 7 petition on April 22, 2018.3 DHS timely filed a complaint under § 523(a)(2) objecting to discharge of the debt owed to it. The complaint alleged the facts recited above and requested that the $3,843 still owed to DHS by the Mcharos be declared nondischargeable under § 523(a)(2), without specifying whether relief was sought under subsection (A) or (B). The Mcharos did not file an answer.
Lafferty, Taylor, Faris

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