Sixth Circuit Discusses Non-Dischargeability Issues on Assigned Debt

In a case issued on June 10, the Sixth Circuit Court of Appeals in In Re Pavdvierz discussed at some length concerns that arise when the creditor pursuing a nondischargeability  action is an “assignee” from the original creditor.  Sixth Circuit cases are binding on our local bankruptcy judges.  In Pavdvierz, the Court found that an insurance company who had paid on a claim and taken assignment of the rights of the insured could pursue a non-dischargeability action for fraud against the original party under § 523(a)(2)(A).  Following the Seventh and Ninth Circuits, the Court’s analysis appears solid.

Although this case involved title insurance and subrogation claims, it is of equal importance to many more non-dischargeability actions, in this day and age when so many promissory notes have been assigned and reassigned in recent years.  The holder of the note or debt will need evidence regarding the original creditor who dealt directly with the debtor.  In all likelihood,  this will be hard to come by.

It is very important for your attorneys to know whether the debt has been assigned to a different creditor in analyzing the potential for non-dischargeability claims and the proof that may or may not exist.

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