By 1960 it had become clear to Congress that the predecessor to § 523(a)(2)(B) was having undesirable effects: imposing severe penalties on noncommercial bankrupts, opening the way to abuse by some creditors, and yielding windfalls for other creditors. See S. Rep. No. 1688, at 2-3 (1960), reprinted in 1960 U.S.C.C.A.N. 2954, 2955. Congress was particularly concerned with the abusive practices of certain commercial creditors who "frequently condoned, or even encouraged, [would-be debtors'] issuance of statements omitting debts with the deliberate intention of obtaining a false agreement for use in the event that the borrower subsequently goes into bankruptcy." Id. (quoting H.R. Rep. No. 1111, at 2-3 (1959)) (quotations in original omitted), reprinted in 1960 U.S.C.C.A.N. 2954, 2955. "[A]rmed with a false financial statement," these creditors had "a powerful weapon with which to intimidate a debtor into entering an agreement in which the creditor agree[d] not to oppose the discharge in return for the debtor's agreement to pay the debt in full after discharge." Id. (quotations in original omitted).

Based on these concerns, Congress recrafted the predecessor to § 523(a)(2)(B) so that false written financial statements made by individuals no longer barred the discharge of all of an individual debtor's obligations. See Act of July 12, 1960, Pub. L. No. 86-621, 74 Stat. 408, 409, § 2. Instead, the statutory language addressing such written statements was combined with the precursor of § 523(a)(2)(A) so that only the specific debt incurred as a result of the false written financial statement was not dischargeable. See id. Under the 1960 amendment the language of the newly-combined predecessor provision to § 523(a)(2)(A) and (B) did not explicitly allow the discharge of debts incurred based on oral misrepresentations going to financial condition. See id.

However, the legislative history's repeated references to false "financial statement[s]," S. Rep. No. 1688, at 2-3 (1960) (using the term "financial statement" seven times) (quotations in original omitted), reprinted in 1960 U.S.C.C.A.N. 2954, 2955, lends support to a strict interpretation of that phrase restricting it to statements pertaining to the overall financial condition of the debtor--and, by extension, to a similarly strict interpretation of the similar phrase "respecting the debtor's . . . financial condition" in § 523(a)(2)(A) and (B). The term "financial statement" has a strict, established meaning, suggesting that the phrase "statement respecting [the bankrupt's] financial condition" for which it is so freely substituted should be given the same meaning. See Black's Law Dictionary (8th ed. 2004) (defining "financial statement" as "[a] balance sheet, income statement, or annual report that summarizes an individual's or organization's financial condition on a specified date or for a specified period by reporting assets and liabilities" or an "income-and-expense declaration"). Moreover, the legislative history's reference to businesses' use of financial statements to establish credit standing also lends support to the strict interpretation of the phrase "statement respecting [the bankrupt's] financial condition," for it is communications as to a person's overall financial condition that are typically used to establish such standing. See S. Rep. No. 1688, at 2-3 (1960), reprinted in 1960 U.S.C.C.A.N. 2954, 2955.

1. 1978 Recodification

In 1978, Congress gave the provisions at issue in this case much of their current wording and recodified them as § 523(a)(2)(A) and (B). See Pub. L. No. 95-598, Nov. 6, 1978, 92 Stat. 2590. The House Committee on the Judiciary noted that the bill that formed the backbone of § 523(a)(2)(A) and (B) was "modified only slightly" from its predecessor, and none of the modifications noted by the Committee impact the meaning of "respecting the debtor's . . . financial condition." H. Rep. No. 95-595, at 364, reprinted in 1978 U.S.C.C.A.N. 5963, 6320; see also S. Rep. No. 95-989, at 78, reprinted in 1978 U.S.C.C.A.N. 5787, 5864. Indeed, Don Edwards, a member of the House Committee on the Judiciary, introduced the amendment that embodied the compromises worked out by the Conference Committee--the final amendment to the bill before its passage--by stating that § 523(a)(2)(A) "is intended to codify current case law." Statement by the Hon. Don Edwards, Sept. 28, 1978, 124 Cong. Rec. H. 11089, reprinted in 1978 U.S.C.C.A.N. 6436, 6453; see also Statement by the Hon. Dennis DeConcini, Oct. 6, 1978, 124 Cong. Rec. S. 17406, reprinted in 1978 U.S.C.C.A.N. 6505, 6522 (introducing the House amendment to the Senate).

Thus, there is no indication in the legislative history that Congress's 1978 decision to allow debts obtained by false oral statements "respecting the debtor's . . . financial condition" to be dischargeable under § 523(a)(2)(A) was intended to work a substantive change in the law. That is, there is no indication in the legislative history that Congress intended to remove from the coverage of § 523(a)(2)(A) any of the debts based on oral misrepresentations going to financial condition that had been within the coverage of that provision's predecessors.

Thus, the legislative history of § 523(a)(2)(A) and (B) supports the strict reading of the phrase "respecting the debtor's . . . financial condition." There simply is no indication in the legislative history that Congress wished to exclude a large class of specific oral misrepresentations from the coverage of § 523(a)(2)(A). Indeed, it appears that § 523(a)(2)(B) and its predecessors were designed to provide an additional remedy for violations premised on the use of a fraudulent writing, not undermine the coverage of § 523(a)(2)(A) and its predecessors.

In Field v. Mans, 516 U.S. 59 (1995), the court held that debts extended based on a debtor's oral fraudulent statements may be barred from being discharged under § 523(a)(2)(A) if a creditor "justifiably" relied on those statements, while debts extended based on a debtor's written financial statements may only be barred from being discharged under § 523(a)(2)(B) if a creditor "reasonably" relied on those statements. Although that decision did not address the issue directly, it lends some support to the notion that a statement "respecting the debtor's . . . financial condition" must relate to a debtor's overall financial health. In discussing § 523(a)(2)(A) and (B), the Court freely substituted the phrases "statement of financial condition" and "financial statement" for the phrase "statement respecting the debtor's . . . financial condition." "Statement of financial condition" and "financial statement" are terms with established meanings that involve an individual or entity's overall financial health. See Black's Law Dictionary (8th ed. 2004) (defining "statement of condition" with a cross-reference to "balance sheet"--"[a] statement of an entity's current financial position, disclosing the value of the entity's assets, liabilities, and owners' equity"--and defining "financial statement" as "[a] balance sheet, income statement, or annual report that summarizes an individual's or organization's financial condition on a specified date or for a specified period by reporting assets and liabilities" or an "income-and-expense declaration"). Thus, the Court's substitution of these established phrases for the more unusual "statement respecting the debtor's . . . financial condition" implies that this unusual phrase should be given a meaning similar to that of the established phrases--not an expansive meaning that might embrace statements respecting only a single aspect of the debtor's financial condition.

Moreover, if the phrase "respecting the debtor's . . . financial condition" were given a broad reading, the resulting exclusion might eliminate coverage for many misrepresentations typical of the common-law torts that Field represents as lying at the heart of § 523(a)(2)(A). See 516 U.S. at 68-69 (noting that "the substantive terms in [§] 523(a)(2)(A) . . . refer to common-law torts" and stating that "[t]he operative terms in § 523(a)(2)(A) . . . 'false pretenses, a false representation, or actual fraud' carry the acquired meaning of terms of art"). Under the broad interpretation, debts incurred as a result of many of the fraudulent statements cited in the Restatement (Second) of Torts, see Field, 516 U.S. at 70, could not be excepted from discharge under § 523(a)(2)(A), since the fraudulent statements would qualify as "respecting the debtor's . . . financial condition" and therefore would be dischargeable. See, e.g., Restatement (Second) of Torts (1976), § 525, illus. 3 (describing a seller's statement that stock shares will pay dividends within five years); id., § 529, illus. 2 (describing a seller's statement that apartments in a building are rented to tenants at a particular rate, but neglecting to mention that the rate has not been approved by rent control authorities, as a fraudulent misrepresentation); id., § 540, illus. 1 (treating a seller's statement to a potential buyer that land is free from encumbrances as a fraudulent misrepresentation of fact).

The trend and reasoning in other courts' decisions interpreting the phrase "respecting the debtor's . . . financial condition" offer persuasive support for a strict reading of the phrase. Chivers, 275 B.R. at 606, succinctly summarizes the trend in these courts' efforts:

The emerging viewpoint follows a strict interpretation. Although it does not require any specific formality, the strict interpretation limits an actionable statement of financial condition to financial-type statements including balance sheets, income statements, statements of changes in financial position, or income and debt statements that provide what may be described as the debtor or insider's net worth, overall financial health, or equation of assets and liabilities. Cases supporting this view generally recite four arguments. First, they argue that the normal commercial meaning and usage of "'statement' in connection with 'financial condition' denotes either a representation of a person's [an entity's] overall 'net worth' or a person's [an entity's] overall ability to generate income." Second, they cite to legislative history that references the statutes' application to the "'so-called false financial statement.'" Third, they argue that the strict interpretation promotes better bankruptcy policy, because narrowing the definition of financial condition in § 523(a)(2)(B) necessarily expands those statements, both written and oral, that do not relate to financial condition that fall within § 523(a)(2)(A) and better harmonizes the statute. Finally, they argue that a strict interpretation is consistent with the historical basis of § 523(a)(2)(B), which was designed to protect debtors from abusive lending practices.

Id. at 615 (citations and footnotes in original omitted). The Chivers court went on to adopt the emerging, strict interpretation:

[T]he strongest argument in favor of the broad interpretation--that had Congress wanted § 523(a)(2)(B) limited to false financial statements, it would have so drafted the statute--is gutted by the Supreme Court's repeated statements in Field v. Mans that § 523(a)(2)(B) refers to false financial statements. While it might be convenient to dismiss Field's repeated references to false financial statements as dicta, Field's meticulous comparison of §§ 523(a)(2)(A) and (B) does not lend itself to that interpretation. Rather, it makes it more difficult to dismiss as unintentional the recharacterization of "a statement in writing . . . respecting . . . financial condition" as a false financial statement. Lastly, Field's recitation of the history of § 523(a)(2)(B) and its goal of preventing abuse by consumer finance companies, which sometimes have encouraged false financial statements by their borrowers for the purpose of insulating their own claims from discharge, lends strong support for adoption of the strict interpretation.

Therefore, the better approach is the strict interpretation of § 523(a)(2)(B) that requires a false written statement to describe the debtor's net worth, overall financial health, or ability to generate income. It is the most consistent with the Supreme Court's interpretation of the statute, it is consistent with the history of the reason for the creation of the statute, it strictly construes § 523(a)(2)(B) against the creditor and liberally in favor of the debtor, and it . . . reconciles §§ 523(a)(2)(A) and (B) without impairing their effectiveness.

Id. at 615-16.

The Bankruptcy Court for the Southern District of New York has also propounded a Chivers-style justification for the strict approach:

Under the so-called strict interpretation, [§ 523(a)(2)(B)] is limited to financial-type statements that are sufficient to determine the entity's overall financial responsibility, but no specific formality is required. These typically include balance sheets, income statements, statements of changes in financial position, or income and debt statements in the case of an individual wage earner, that reflect a person's ability to pay an additional debt. By contrast, a statement relating to the financial condition of a single asset does not qualify.

Proponents of the strict view rely on the language used in the code, and point to its legislative history. They give "financial condition" its normal commercial meaning and usage. Further, the floor statements by Representative Edwards and Senator DeConcini, sponsors of the Bankruptcy Reform Act of 1978, indicate that the exception encompassed the use of the "so-called false financial statement." . . .

Finally, the strict view promotes better bankruptcy policy. Virtually any statement concerning an asset or liability arguably relates to financial condition. If drawn too broadly, the definition will sweep in many oral misrepresentations, and therefore exclude them from coverage under subdivision (A). These debtors will thereby escape the anti-discharge provisions completely.

. . . .

The arguments supporting the strict view are more persuasive [than those supporting the broad view]. [The arguments supporting the strict view] are consistent with ordinary usage and faithful to the intent of Congress as reflected in the statements of the sponsors. Moreover, the strict view better reflects the limited purpose that subdivision (B) was intended to serve. Subdivision (B) and its predecessors (dating back to 1903) were designed to protect debtors from abusive lending practices. . . .

Th[ese] practice[s] gave the lender leverage to extract a settlement or reaffirmation, despite a weak case, from a debtor intent on avoiding litigation costs. Section 523(a)(2)(B) (and its predecessors) . . . were intended to reduce the pressure on the honest debtor to settle. The lender must defend the adequacy of its lending form in the comparatively debtor-friendly bankruptcy court. Under § 523(d), the prevailing debtor may recover costs and attorneys fees from the creditor. Finally, § 523(a)(2)(B) requires proof of reasonable reliance, an objective standard. Hence, the lender's access to other information regarding the debtor's financial condition is relevant.

Admittedly, section 523(a)(2)(B) is not limited to extensions of credit by consumer finance companies or other lenders. It also applies where the debtor obtains goods or services. Nevertheless, it was designed to deal with a specific problem--tricking the debtor into presenting a false picture of his overall financial condition. Certainly, it was not intended to create an exception that swallowed up the general rule in subdivision (A). In this regard, virtually every statement by a debtor that induces the delivery of goods or services on credit relates to his ability to pay. The broad interpretation would permit many dishonest debtors to avoid the consequences of oral fraud. The better rule decides cases on their merits, rather than upon the construction of an ambiguous, statutory phrase that grants a fresh start without regard to the honesty of the debtor.

Weiss v. Alicea (In re Alicea), 230 B.R. 492, 502-04 (Bankr. S.D.N.Y. 1999) (citations and footnotes in original omitted).

Given the smaller number of circuit court decisions interpreting the phrase "respecting the debtor's . . . financial condition," discerning a trend in the circuit court decisions is difficult. As noted above, the Fourth Circuit appears to have adopted the broad interpretation, though it did so only in a brief 1984 opinion that it has never cited again. See Engler, 744 F.2d at 1061 ("A debtor's assertion that he owns certain property free and clear of other liens is a statement respecting his financial condition."). The Eighth Circuit's decision in Rose v. Lauer (In re Lauer), 371 F.3d 406, 413-14 (8th Cir. 2004) (finding a debt nondischargeable under § 523(a)(2)(A) because the debtors "committed garden variety common law fraud when they induced [the creditors] to sell their limited partner interests by concealing material changes in the [partnership's] asset mix"), provides support for the strict interpretation.⁽⁴⁾

Ultimately, we conclude that the trend cited by Chivers and the reasoning employed by Chivers and Alicea offer persuasive support for the strict reading.

D. Summary of Legal Analysis

For the above reasons, it appears that the strict reading of "respecting the debtor's . . . financial condition" is correct. It is the reading most consistent with the text and structure of the Bankruptcy Code, the legislative history of § 523(a)(2)(A) and (B), and case law. To state generally that we adopt a strict interpretation is not enough to resolve this case or to provide guidance to future courts, however; we must also define precisely the scope of the phrase "respecting the debtor's . . . financial condition."

Title 11, United States Code § 523(a)(2)(A) generally bars the discharge of the debts of an individual debtor to the extent that those debts were obtained by false pretenses, a false representation, or actual fraud. However, to the extent that those debts were obtained by the use of a false oral statement respecting the debtor's or an insider's financial condition, they are dischargeable. We hold that such false statements are those that purport to present a picture of the debtor's overall financial health. Statements that present a picture of a debtor's overall financial health include those analogous to balance sheets, income statements, statements of changes in overall financial position, or income and debt statements that present the debtor or insider's net worth, overall financial health, or equation of assets and liabilities. However, such statements need not carry the formality of a balance sheet, income statement, statement of changes in financial position, or income and debt statement. What is important is not the formality of the statement, but the information contained within it--information as to the debtor's or insider's overall net worth or overall income flow.

1. Application

In this case, the findings of the bankruptcy court indicate that Joelson made at least two types of representations. First, Joelson made representations as to her ownership of certain specific assets (the "Ownership Representations"). Second, Joelson made representations as to her intention and specific ability to obtain financing from her brother to repay Cadwell's loan (the "Repayment Representations").

The Ownership Representations address only Joelson's ownership of certain assets. Thus, the Ownership Representations do not constitute a statement as to Joelson's overall financial health analogous to a balance sheet, income statement, statement of changes in financial position, or income and debt statement. Therefore, the Ownership Representations do not qualify as "respecting the debtor's . . . financial condition" under the strict definition of that phrase. See Lauer, 371 F.3d at 413-14; Bal-Ross Grocers, Inc. v. Sansoucy (In re Sansoucy), 136 B.R. 20, 23 (Bankr. D. N.H. 1992) ("[A]n oral misrepresentation that certain collateral was free and clear of any liens [i]s actionable under 523(a)(2)(A).").

Similarly, the Repayment Representations are not a statement as to Joelson's overall financial health. Joelson's representation to Cadwell that Cadwell would be able to look to Joelson's brother for repayment is analogous to Joelson's representation to Cadwell that she owned one particular asset. Just as a statement about one of Joelson's assets is not a statement that reflects Joelson's overall financial health, and therefore does not "respect[] the debtor's . . . financial condition," a statement about one part of Joelson's income flow--the flow of funds from her brother--does not reflect Joelson's overall financial health. Therefore, the Repayment Representations also are not "respecting the debtor's . . . financial condition."

Because the Ownership and Repayment Representations do not constitute statements "respecting [Joelson's] financial condition," the state court judgment on Cadwell's loan to Joelson is not dischargeable under § 523(a)(2)(A). Thus, the bankruptcy court and BAP correctly held that the debt owed by Joelson to Cadwell is non-dischargeable under § 523(a)(2)(A).⁽⁵⁾

For the foregoing reasons, we AFFIRM the judgment of the BAP.

^*. After examining the briefs and appellate record, this panel has determined unanimously to grant the parties' request for a decision on the briefs without oral argument. See Fed. R. App. P. 34(f) and 10th Cir. R. 34.1(G). The case is therefore ordered submitted without oral argument.

^1.The promissory note is not part of the record, and there is no indication in the opinions of the bankruptcy court or the BAP as to the note's contents. Thus, it is not clear whether all of the properties and the antique cars that Joelson said she owned were intended as collateral. However, we need not determine what Joelson listed as collateral in the note in order to resolve this appeal. This is because we only need consider the fact that Joelson made representations as to her ownership of various properties and vehicles in order to obtain a loan from Cadwell.

^2.Because neither the parties nor the courts below address whether the list of antique vehicles that Joelson provided to Cadwell renders the state court judgment nondischargeable under § 523(a)(2)(B), we need not and do not consider the issue. See Singleton v. Wulff, 428 U.S. 106, 120 (1976); Bancamerica Commercial Corp. v. Mosher Steel of Kan., Inc., 100 F.3d 792, 798-99 (10th Cir.), op. amended on other grounds, 103 F.3d 80 (10th Cir. 1996).

^3.We may examine this legislative history because this is not a case where the meaning of the Bankruptcy Code is clear from the statute's text. Cf. United States v. Ron Pair Enters., Inc., 489 U.S. 235, 240-41 (1989).

^4.While the issue of how to interpret the phrase arose in two other circuit court cases, those courts did not definitively interpret the scope of the phrase. See Bogdanovich, 292 F.3d at 113-14 (refraining from adopting either the strict or the broad interpretation for justiciability reasons); Berkson v. Gulevsky (In re Gulevsky), 362 F.3d 961, 962-64 (7th Cir. 2004) (declining to address a bankruptcy court finding that "because [the debtor]'s misrepresentations were of his financial condition, and were oral, they were not actionable under any part of § 523(a)(2)").

^5.Debtor also represented that she and Joelene Joelson are the same person (the "Identity Representation"). We refrain from addressing whether the Identity Representation is sufficient to render the state court judgment nondischargeable. Because the bankruptcy court was unable to conclude "whether Jolene or Joelene is simply a name used by [Debtor] or a different person entirely," it is not clear whether the Identity Representation was a false representation as defined by § 523(a)(2)(A) that would bar the state court judgment from being discharged, and we may not attempt to resolve this factual issue. See Novelly v. Palans (In re Apex Oil Co.), 960 F.2d 728, 731 (8th Cir. 1992) ("If we conclude that the bankruptcy court's findings are silent or ambiguous as to an outcome determinative factual question, we may not make our own findings . . . .").

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