If someone lied on a credit application for a car loan, will there be an issue because of this if they file for bankruptcy?

UPDATED: Nov 5, 2011

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If someone lied on a credit application for a car loan, will there be an issue because of this if they file for bankruptcy?

A friend of mine lied on a car loan application to get financed. Lied about employment, source of income and verification. Now my friend is considering bankruptcy to discharge a few unsecured debt loans, credit cards (did not lie on those). If my friend wants to keep the car, payments are current, never been late, will there be an issue because of untruthful car loan application? The accounts for which seeking discharge are unrelated to this application/loan.

Asked on November 5, 2011 under Bankruptcy Law, Arizona


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

If someone lies on a credt application and the other party becomes aware of that, they may rescind the contract immediately; that is, they may void it at their choice because it was based on a false set of facts. At a minimum, they can get the car back; the bankruptcy, if he files it, may shield him from any claim for repayment of any monies loaned to him (the remaining balance on the loan), which otherwise they'd be entitled to seek immediately, though he should consult with a bankruptcy attorney to make sure that his deliberate fraud does not vitiate the protection of bankruptcy vis-a-vis this creditor.

Furthermore, he may well have committed criminal fraud, by lying to gain monies (the loan) to which he is not entitled; that is, this may qualify as a form of theft. The facts, as you write them, would seem to support criminal liabilty, since he evidently lied comprehensively and deliberately. Your friend should consult with an attorney about his situation in detail to determine his potential exposure under different scenarios.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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