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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