Debtor filed his Chapter 7 petition for relief on December 6, 2016. Creditor Acceptance filed this adversary proceeding on December 29, 2016, alleging that the debt owed to it by Debtor should be declared nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A). The debt arose when, on September 19, 2016, Debtor deposited a live check from Acceptance Loan in the amount of $2,005.75 (hereinafter referred to as the “2016 loan”). According to the testimony of Mr. Dial, the check was sent to Debtor in a “batch” of “live checks” from Acceptance to customers that it had determined were qualified for an extension of credit on a pre-approved basis. Mr. Dial stated that Acceptance utilizes a 24-point criterion to determine the creditworthiness of their customers for additional credit. The process begins with a survey of the Transunion credit histories of approximately 22,000 existing customers. The 24-point criterion is then applied to each customer until the least creditworthy customers are weeded out and only the most suitable customers remain. On this occasion, approximately 1,700-2,000 customers were pre-approved for an extension of credit via live check. Mr. Dial further stated that it is Acceptance’s policy not to send pre-approved extensions to new customers, but only to existing customers that exemplify the “ability and good will/intent to pay.” Though there was no testimony regarding when Debtor became a customer of Acceptance, it was undisputed that he was not a new customer. Thus, he was one of the 22,000 existing customers that was considered for an unsolicited pre-approved extension of credit.
As an existing customer, Debtor had at least two prior loans with Acceptance before taking out the 2016 loan at issue. These two prior loans were relevant in Acceptance’s pre-approval of Debtor. The first loan was for approximately $350.00, which Debtor paid off in full before the loan term ended. The second loan was for approximately $3,028.80, and originated in September of 2015 (the “2015 loan”). The 2015 loan was initiated in the same fashion as the 2016 loan at issue—a batch of pre-approved live checks mailed to qualified customers. As of September 12, 2016, Debtor was still paying on the loan, with a balance of $2,784.00. The minimum monthly payment on the 2015 loan was $112.00. The Debtor testified that he usually paid more than the minimum monthly payment on this loan, and Mr. Dial testified that Debtor had a “perfect” pay history on this loan.
Having considered Debtor’s pay history over the course of at least two years, Acceptance reviewed his creditworthiness, applied the 24-point criterion and concluded that Debtor fit the profile to receive the pre-approved extension of credit. The check mailed to Debtor stated on the back of the check,
NOTICE TO CONSUMER: BY SIGNING AND DEPOSITING (OR CASHING) THIS, YOU HAVE AGREED TO REPAY MONIES AS STATED. DO NOT SIGN THIS BEFORE YOU READ IT AND THE AGREEMENT, OR IF EITHER CONTAINS BLANK SPACES.
THE UNDERSIGNED ACKNOWLEDGE(S) RECEIPT OF BOTH A COPY OF THE TERMS OF THIS PROMISSORY NOTE AND ARBITRATION AGREEMENT.
FUTHERMORE, THE UNDERSIGNED CERTIFIES THEY HAVE ABILITY TO REPAY THIS DEBT.
Debtor received the live check in the mail, and deposited it on September 19, 2016. Debtor testified that his wife also received the same offer, but they did not deposit the check mailed to her.
After Debtor deposited the check for the 2016 loan at issue on September 19, 2016, he made no more payments on the 2015 loan, and never made any payments on the 2016 loan at issue. Debtor filed for Chapter 7 relief four months and ten days thereafter.
Debtor testified that he is a disabled veteran and lives on social security disability income and VA benefits. He has been married for 35 years. He has two sons, one of which experienced reoccurring medical issues during the summer and fall of 2016 for which Debtor was financially responsible. He testified that their home has had unexpected plumbing problems over the course of the last few years and experienced a major failure in December 2016 which was not covered by insurance.
Debtor’s Schedule E/F, which was admitted into evidence, indicates that he has approximately 14 unsecured accounts totaling $53,074.00 in unsecured debt, the majority of which he testified accrued prior to becoming a customer of Acceptance. The majority of the 14 unsecured debts are less than $6,000.00. Two unsecured debts are somewhat larger, in the amounts of $10,464.82 and $8,631.73 with Citi Card and Discover, respectively. Acceptance is the only creditor that filed a dischargeability complaint against the Debtor.
Debtor testified that he honestly believed for quite some time that he could dig himself out of debt. However, when the home repairs and medical bills began to stack up, his wife began suffering anxiety and stress due to their financial crisis. Debtor testified that he was embarrassed by his financial situation and that it was difficult to admit that he was in such deep financial trouble.
In October of 2016, Debtor and his wife searched the phone book for a bankruptcy attorney they felt qualified to handle their case. They chose attorney Fran Hollinger and at some point during that month, they consulted with her about filing for relief.
Mr. Dial testified that when a customer defaults on a payment, an Acceptance employee begins making collection calls to the customer. Once the call is over, Mr. Dial stated that the employee enters notes into their system regarding the content of the collection call. In October of 2016, Debtor began receiving collection calls from Acceptance. Mr. Dial read the notes for one particular call into the record.
The note reflects that Debtor stated to the Acceptance employee that he had spoken with attorney Fran Hollinger regarding filing bankruptcy, but that he was unsure of the chapter under which he would file. The call ended and the Acceptance employee performed a PACER search to determine if Debtor had filed for bankruptcy relief. Mr. Dial testified that the note stated there was no record of Debtor having filed for bankruptcy relief. Debtor testified that he did not retain Ms. Hollinger until December of 2016 when he actually filed bankruptcy, and that he did not pay her retainer with any of the funds from the 2016 loan.
For relief, Plaintiff prays that the 2016 loan be excepted from discharge on the grounds that Debtor had the requisite intent to defraud Acceptance Loan by accepting the unsolicited benefits of the live check without ever intending to repay the same. Acceptance also contends that Debtor’s actions after accepting the funds constitute material misrepresentations by Debtor that the loan would be repaid. Debtor disputes these allegations.
Many of the findings of fact necessary to determine the dischargeability of a debt involve the intent of the debtor. Intent is to be determined by reviewing all of the evidence presented and the credibility of the witnesses. Having observed the Debtor during testimony, and evaluating what he said in light of all the other evidence, the Court finds him to be a credible witness. Debtor was forthcoming in his answers and was not evasive.