Intent Not Ability Pay Determining Factor In Bankruptcy Dischargeablity In a Chapter 7 bankruptcy case involving a saw mill worker who was temporarily laid off from work when he incurred over $5,000 in credit card charges, the bankruptcy court determined that the debts incurred during his time of unemployment were in fact dischargeable in Chapter 7 bankruptcy.

The details of the bankruptcy case:

The debtor, a saw mill worker was temporarily laid off from work as he always was for the winter; but genuinely believed that he would be rehired in the spring.  But in the winter of 2008, the debtor learned that he needed surgery but believed he would successfully recover from the surgery and return to work. When the debtor did not recover properly from the surgery and subsequently was not rehired, he applied for and began receiving social security disability benefits. During his time of unemployment, the debtor incurred $5,583.79 in credit card charges; but made minimum payments each month until he eventually filed Chapter 7 bankruptcy in April 2009.  The creditor objected to the dischargeability of the $5,583.79 accusing the debtor of fraud or false pretenses, saying that the debtor incurred the debt knowing that he could not afford to pay it.  But the bankruptcy court disagreed with the creditor noting that the debtor had every expectation of returning to work in the spring of 2009 because he was always rehired and that the fact that the debtor made all of his minimum payments proved that he had intentions of paying the debt.  The bankruptcy court also said that because the creditor focused on the debtor’s ability to pay only and failed to address the debtor’s intent to pay that the creditor had no good legal reason for objecting to the dischargeability of the debt in the first place and ordered the creditor to pay the attorney fees of the debtor in the case.