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Discharge-for-value defense: Difference between revisions
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But the court went further than that. It could find no authority to support the argument that the [[debt]] needed to be immediately ''due'': it just needed to be a bona fide ''debt'': | But the court went further than that. It could find no authority to support the argument that the [[debt]] needed to be immediately ''due'': it just needed to be a bona fide ''debt'': | ||
{{quote| | {{quote|“In sum, the court concludes that the recipient of funds need not show that an outstanding debt was “due” when it received the funds in order to invoke the discharge-for-value defense. Instead, it is sufficient for the party invoking the defense to show that, at the time the funds were received, it was a bonafide creditor. Defendants meet that burden here ...”}} | ||
This, I submit, is on-its-face bonkers. Take the scenario where the [[creditor]] and [[debtor]] have an agreed [[term loan]] payable in, say, 25 years. You know, like a mortgage. Often it will be a condition of the [[mortgage]] that the borrower’s salary is paid into an account at the same bank. If the discharge-for-value defense operates as interpreted in {{casenote|Citigroup|Brigade Capital Management}}, the bank could apply the borrower’s total salary in retirement of the [[principal]] on the loan, notwithstanding the principal amortisation schedule in the [[mortgage]] loan, and refuse to let the borrower have any money to pay her bills. That is plainly potty. | This, I submit, is on-its-face bonkers. Take the scenario where the [[creditor]] and [[debtor]] have an agreed [[term loan]] payable in, say, 25 years. You know, like a mortgage. Often it will be a condition of the [[mortgage]] that the borrower’s salary is paid into an account at the same bank. If the discharge-for-value defense operates as interpreted in {{casenote|Citigroup|Brigade Capital Management}}, the bank could apply the borrower’s total salary in retirement of the [[principal]] on the loan, notwithstanding the principal amortisation schedule in the [[mortgage]] loan, and refuse to let the borrower have any money to pay her bills. That is plainly potty. | ||