Creditor Must Provide Evidence of Malicious ActsIn the bankruptcy case of Powell, James D. and Betty J., In re (Ameri­can Bank of Commerce v. Powell), the bankruptcy court ruled against the creditor who accused the debtor of willfully and maliciously causing injury.

The details of the bankruptcy case:

The elderly debtor kept “pasture cattle” on 20 leases that included properties with rivers and heavy mesquite growth. The debtor maintained his inventory of pastured cattle in a handwritten “tally book.” When cattle were moved off pasture, they became “feed lot cattle,” in which the debtor would have “equity” depending on whether the ultimate sale price to third parties exceeded the original amount paid to the debtor by the feed lot plus the upkeep charges. The debtor maintained a line of credit with the bank. When the debtor ran into financial difficul­ties, the bank granted an extension on the maturity of the most recent renewal note. Thereafter, the debtor signed an informal letter agreement, which required the debtor to: 1) provide financial statements; 2) maintain a 20 per­cent equity margin, with no mechanics for computing or monitoring the margin; and 3) allow the bank to inspect the cattle. Eventually, the bank accelerated the loan when it discovered that the number of existing cattle fell far short of the debtor’s tally. The debtor filed for Chapter 7 relief. The bank commenced a nondischargeability action.

The bankruptcy court ruled in favor of the debtor saying that while the cattle that was in the debtor’s possession did “disappear” the creditor failed to provide evidence that the debtor had sold or diverted the cattle with the intention of harming the creditor. Also the bankruptcy court noted that the bank should have known that an elderly person could not do an actual count of cattle in such a rough terrain.  For the debtor’s part, he said that he did not account for dead cattle.  The bankruptcy court recognized that while there may have been errors in reporting the head count of the cattle it was not willful and malicious.

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