TAYLOR v. SYKES, 2005 U.S. Dist. LEXIS 34904.

TAYLOR v. SYKES, 2005 U.S. Dist. LEXIS 34904.

The creditor, who was faced with foreclosure, sold her home to the debtor. The debtor allegedly transferred sale proceeds of $10,886 to a third party, changed the sale price on the closing statement from $126,000 to $115,000, and executed a mortgage note to the creditor for $17,250 that was purportedly intended to pay off the creditor’s mortgage but that effectively allowed the debtor to keep those proceeds. The bankruptcy court struck a claim under the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFDBPA), 815 Ill. Comp. Stat. 505/1 et seq., and found that only the $10,886 was non-dischargeable. The district court found that the bankruptcy court erred in finding that the $17,250 note was dischargeable because the creditor failed to show justifiable reliance as required under 11 U.S.C.S. § 523(a)(2)(A); the creditor could have justifiably believed that the loan proceeds would be used to pay off the mortgage. The bankruptcy court also erred in finding that the $11,000 sales price reduction was not a separate fraud. The creditor was entitled to attorney’s fees under the note, but not under the ICFDBPA, as the statutory claim had been stricken entirely.

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