Bank Debt Dischargeable In Bankruptcy.

The debtors (a farming married couple) borrowed $150,000 from a bank in exchange for a security agreement and note.  While the security agreement required the debtors to deposit all proceeds from the sale of collateral (crops, equipment, etc.) in their bank account, the bank did not strictly enforce the requirement.  The debtor/husband was injured in a farming accident  and relatives conducted the farming activity without depositing crop proceeds in the bank account.  Instead, farm income was largely used to pay medical bills of the debtor/husband.  The husband/debtor's son began his own farming operation in 2012 using his father's equipment and the son financially assisted his father.  The debtors filed Chapter 7 in early 2013 and the bank claimed that almost $75,000 of debt should not be discharged due to the debtors' willful and malicious injury to the bank.  The bank claimed that the debtors and son structured the farming operation to evade the deposit requirement.  The court allowed the debt to be discharged in full.  The court determined that the bank failed to prove that the farming operation, in 2012, was the debtors'.  The bank also failed to prove injury, willfulness, and malice as required by 11 U.S.C. Sec. 523(a)(6).  The court viewed the debtors' testimony as credible.  In re Jacobson, 532 B.R. 742 (Bankr. N.D. Iowa 2015).

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