Wednesday, May 19, 2010

Section 523(a)(4): Embezzlement

Section 523(a)(4) provides an exception to the general


discharge for debtors who embezzle assets of an objecting


creditor. Courts look to the federal common law definition


of embezzlement for purposes of non-dischargeability as the


fraudulent appropriation of property by a person to whom


such property has been entrusted, or into whose hands it has


lawfully come.



To establish a claim of embezzlement under §523(a)(4), a


creditor must show that (1) property owned by another is


rightfully in the possession of debtor; (2) debtor’s


appropriation of such property to a use other than the use


for which the property was entrusted to debtor; and (3)


circumstances indicating fraudulent intent. Absent intent to


defraud, a debtor’s appropriation of funds does not arise to


the level of embezzlement.
 
Warmest Regards,

Bob Schaller

Your Bankruptcy Advisor

Blog By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm Click for Bankruptcy Lawyer Job Opportunities. You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at Discharging Student Loans to learn about how the bankruptcy laws can help you. Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys. For information about Chapter 7 bankruptcy Click Here
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